The Dividend Investing Resource Center

Letting Dividends Do Their Work

DRIPs 101: Starting a DRIP

Robert Gibb

Recently I read another article in a prominent Canadian newspaper on dividend reinvestment plans (DRIPs). Articles of this sort are always positive about the benefits of DRIPs especially regarding cost savings to the investor. However, newspaper articles on DRIPs seem to think the only way to begin a plan is through a broker. Whether this is the result of the influence of advertisers or ignorance is unclear. Regardless, starting a DRIP through a broker is likely the most costly of several methods. Let’s look at various methods.


Using a broker to start a DRIP is the method, in my experience, most likely to be used by beginners. The usual procedure is to purchase one or more shares of a DRIP-offering company through a broker. Some companies require more than one (1) share to start, so make sure you know the minimum requirement before you purchase. After purchasing a share, the client then requests that the broker takes the share out of "street name". Street name means the share is held in the account by the broker acting as your representative. The broker will then remove the share from the account and courier or mail the share certificate to you. The broker will charge you a transfer fee for this service. Sometime later the plan administrator should automatically mail you registration materials. This might not be until the next quarterly statement.

Full service brokers charge more than discount brokers. Typically, discount brokers charge $25 to $30 commission to purchase and $25 to $50 to transfer the share out of street name. After GST is added, the total cost runs from $53.50 to $85.50. If you’re buying a U.S. DRIP the charge is in U.S. dollars, so your cost will be approximately C$75 to $115.

DRIP Services

With an estimated two million active DRIPpers in the USA, different services are available to target this group. Two of note:

The National Association of Investors Corporation (NAIC) is a non-profit society in the USA aimed at investment clubs. NAIC is not a broker. There is a yearly membership fee (US$39) which is higher for Canadians (add US$29). However, they have a low-cost purchase program that for US$7 per company can be used to start DRIPs. See

Someone wishing to start several DRIPs in the same year might find this service reduces total costs.

My favourite service is MoneyPaper/Temper of the Times (aka: Direct Investing) at

Open to Canadians, Temper is a broker that does not hold shares in account or street name. Temper will purchase from one to one hundred shares in about eight hundred DRIP companies for members for US$15 to $20. Non-members pay US$30. There is a very minor add-on charge per number of shares ordered as well. With the Canadian dollar currently around US$0.73, costs are approximately C$21 to $28 including the transfer fee. Compare that with the costs for the Canadian discount brokers above. Remember though, at these prices you cannot expect personal customer service.

MoneySaver members have access to MoneyPaper membership prices. The account number and password are listed a few times a year on the Member Benefits page. Best of all, they offer several Canadian DRIPs.

For Canadians, the usual procedure is to fill out an order form, download it and mail it in with proper payment. Money orders in U.S. funds are acceptable. If you are using cheques make sure they have U.S. and not Canadian transfer codes. If you are not sure about this, ask at your bank.

Direct Stock Purchases

Somewhere in the neighbourhood of seven hundred U.S. DRIPs can be started directly from a company without going to a broker at all with a direct stock purchase (DSP). Many DSPs accept Canadian investors. Most DSPs have an account set-up fee in the US$10 to $15 range (C$14 to $21). The downside of DSPs is that many have fees for making optional payments, commonly US$2.50 to $5. However, not all DSPs come with OCP (Optional Cash Plan - like Share Purchase Plan)fees (Pfizer and Exxon, for example).

The effect of OCP fees can be reduced by making fewer but larger contributions.

Note: It pays to look closely at information about various plans. As an example, Johnson and Johnson, though not a DSP, says it is not open to foreign investors. Yet, JNJ accepts Canadians. I’m not quite sure what that means about our independence!

The mechanism is now in place for Canadian companies to offer DSPs but only the Ontario securities commission have passed the legislation to allow it. No companies have started a plan yet.

Transfer from Existing Accounts

If you already own a block of shares in a company offering a DRIP, it is possible to transfer one, some, or all of the shares out of street name to register in the plan. In my own case I held Bank of Nova Scotia in an RRSP. I transferred one share out of the RRSP. At the same time an equal amount of cash was transferred into the RRSP. I then registered that share in the DRIP. I paid a $25 transfer fee to do this.

Note: Only the dividends from the transferred shares are eligible for reinvestment. The dividends from shares still held by the broker will be eligible for any broker’s synthetic DRIP. Recently, TransAlta began to allow shares held by a broker in a cash account to participate in their plan. Particulars can be found at

Transfer from Others

Someone you know, friend or relative, might own DRIP-eligible shares. If the shares are in the plan already, all that is needed is a signature guaranteed letter to the plan administrator transferring the appropriate number of shares. Be prepared for the administrator to send back their own form to complete. Don’t tie yourself in knots if a "Medallion Program" signature guarantee is required for a U.S. DRIP. They are hard to get in Canada. Just get a bank signature guarantee and attach a letter indicating the difficulty getting Medallion certification in Canada. Usually the only fee is the cost of a postage stamp.

On the back of some optional payment slips there is a section to transfer shares as above. Attach a letter indicating that you are using this method. I’ve twice had transfers fail to go through because no one read the back of the OCP slip.

If the other person holds the shares in a brokerage account, the usual broker transfer fee likely applies.

Share Exchange Boards

There are Internet services in the USA that, for a fee, will connect persons wishing to exchange shares for the purposes of establishing DRIPs. No broker is involved. For this fee, the exchange service makes sure both parties complete any transaction. While the costs are well below Canadian discount brokers, my research finds that the fees for this service are higher than the cost of purchasing through MoneyPaper/Temper of the Times.

Recently a free share exchange board was started at the Dividend ReInvestment Resource Centre at

DIRC is a center for DRIP enthusiasts. It is strictly non-commercial and free (although some of us have made donations to help pay for hosting the web site). I have successfully taken part in starting two DRIPs on this board for only the cost of postage stamps. The downside is you have to trust the other person to complete their end of the bargain. There is no third party involved to guarantee success. Guard yourself accordingly.

The Club Approach

Using the Transfer from Others method above, it is possible to split a commission. In an extreme example, suppose there is an investment club/group of ten persons wanting to start a DRIP in BCE. One person would purchase 10 shares of BCE. After the DRIP account is established, it is then possible to transfer single shares to each of the other nine participants through the plan administrator. There should be no charge for this process.

The result is a ten-way split of a single commission. Again, in the extreme, if the purchase was made through MoneyPaper, counting stamps and other fees, the total cost should be about C$25 or $2.50 commission per person. Even using a Canadian discount broker yields a total cost of $5.35 to $8.55 per person in the example.

Just Plain Gumption

I’m not advocating the following method but I certainly admire this person’s audacity.

I used to communicate with a lady who started DRIPs through brokers and paid no fees whatsoever. Walking into an office she would tell the broker she was interested in "these stock things", knew nothing about them, wanted to try one but was really scared about buying them. Sensing future business from an inexperienced investor, the broker would give her the first purchase commission-free. When she said that she was nervous about anyone else holding the certificate, the broker would offer to transfer the first certificate to her for free as well.

She insists that she started twelve DRIPs this way, five from one broker alone before he showed her the door. There’s always a way!

Whichever method you use above, remember that patience is a virtue. DRIPs take time to establish.

Robert Gibb, 401-2910 Cook Street, Victoria, BC, V8T 3S7 (250) 383-7075 Robert Gibb is a retired school teacher. He gives seminars on dividend reinvestment plans. Mr. Gibb is a frequent contributor to Internet DRIP boards under the nickname OperaBob.

© Canadian MoneySaver, PO Box 370, Bath, ON K0H 1G0 613-352-7448 - Published July/August 2003

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