{ 11 comments… read them below or add one }

1 Mr. Cheap

The 2% discount is definitely great news, but my understanding is it ONLY applies to re-invested dividends, NOT to optional cash purchases (so if you contribute $100 / year you don’t get the 2% discount on the $100, but you will get it on all dividends that are paid in the future, including those from the stock bought with the $100).

Definitely a good reason to make sure you’re signed up for the DRiP and reinvesting the dividends (instead of getting them as cash).

2 Four Pillars

Mr. Cheap – you are absolutely correct – I edited the post.

I guess 2% discount on ALL purchases would be a little too good to be true!

3 Ray

Maybe this has been covered before but how do you buy from Compushare for this program and avoid the brokerage? Just write them a check? I kind of like all my investments being in a central portal (like TDW), is there any way to transfer those assets in once you’ve bought them with other means?

4 Mr. Cheap

Hi Ray,

There’ll be a series of posts on exactly this topic in the future, but the short version is:

1) Buy a share at a discount brokerage, get it in certificate form (costs $50 at E*Trade).
2) After you have at least one share in your name (when you buy through a brokerage the share is held in “street name” meaning that brokerage holds it in their own name for you) you may send in “optional cash purchases” (OCP), with some restrictions, which allow you to buy more shares by sending in a check to computershare (or another transfer agent – depending on the company).

You *COULD* accumulate the stocks in a drip, and transfer them over to a “central portal” regularly, but I think it’d be more trouble than its worth (and you’d probably be better maximizing the amount in the DRiP if it had a discount).

http://dripinvesting.org/ has all the information you could ask for (including a forum where you can get any / all questions answered). Derek Foster’s book “Lazy Investor” also has a chapter on setting up DRiPs.

5 Ray

Thanks – but I’m having a hard time following. I already drip all my investments (XIU, XEG, XGD, etc) so I’m familiar with the process through TDW. I just want my drip to qualify for the extra 2% off the drip purchases in the easiest way possible. I don’t particularly want to hold anything in “certificate” format, I don’t really want to write cheques, there has to be a better way for a quarterly dividend. Otherwise it sounds like 4 times a year it becomes a huge mess when right now it’s super convenient (just tell the brokerage “enable drip!”). I look forward to any future topics on this and I’ll follow your link – thanks!

6 Mr. Cheap

Ray: Yeah, unfortunately it’s easy to set it up a DRiP at TDW, but you don’t get the 2% discount. Apparently *some* brokers pass it along to their clients, some don’t. Call TDW, but if they don’t pass it along to you, there isn’t a simple way to get it.

7 Sampson

I’ve got an account with RBC direct investing and its a little weird.

I have had them pass the discount to me, but only for CERTAIN holdings, of which they won’t tell you which ones. They have a master of list of equities eligible for DRIPS, and separate lists for ones eligible for real/discounted drips vs. synthetic ones.

Pain in the butt cuz you have to ask re: each holding, or potential holding.

8 Dividend Growth Investor

It’s always interesting to find an extra “edge” in the compounding of your investments. A dividend growth stocks, that is increasing its dividends consistently is letting you further reinvest the growing payments into discounted stocks. Talking about triple compounding effects 🙂

9 Brian

Another problem with synthetic drips is that you can cannot reinvest those dividends into fractional shares.

10 James

Scotia: BNS is also doing this. Although I do like the discount, its actually a bad thing in the long run. Why? Because it means that BMO and BNS are issuing shares from treasury in order to give dividends and this only waters the shares down. So you get more shares because of the discount but the shares are actually worth less because there are more shares being issued and supply/demand kicks in. Under the plan in usual circumstances the bank would purchase the shares for the DRIP on the open market. It is never good when the bank(s) are issuing shares because in the long run when there are more shares each share is less valuable.


What is the diference between real/discounted drips and synthetic drips?

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