If you’ve decided you want to enrol in a dividend reinvestment plan (DRIP), but need a starter share to enrol in the plan then a good option to consider is buying the share from the share exchange on the DRIP Investing Resource Center.
If you’ve decided that you are going to buy your share from the share exchange on the DRIP Investing Resource Center, you’ve come to the right place. This article should guide you step by step through the whole process.
When I first started DRIPing I found it overwhelming. The learning curve can be quite steep, so it’s my hope that this article should help clarify the process and guide you. A word of warning for beginners. Before buying a share there are a number of factors to consider first, so I’d urge you to read the related article below before proceeding.
How to buy a share on the DRIP Investing Resource Center’s share exchange
I’ve broken the steps into the following sections.
- Registering with the DRIP Investing Resource Center (steps 2 to 7)
- Share exchange forum explained and finding a share to buy (steps 8 to 12)
- Verifying the reputation of a seller (steps 13 to 19)
- Searching the boards for a company share to buy example (steps 20 to 23)
- Posting a request to buy shares on the share exchange forum (steps 24 to 27)
- Contacting the seller and buying the share (steps 28 to 29)
- Share transfer process and timeline
Go to the website: http://www.dripinvesting.org/ and click on Community.
The page will look something like below. You can see the Share Exchange is one of the Boards in the forum. This is the area that you use to buy shares. You will need to register so that you can post on the forum. Don’t worry it’s free. Click on Login/Register.
Fill out the registration details and click on “Submit Information”.
You will get a confirmation screen with your username and password. It’s a good idea to update you profile with your email so seller’s will be able to contact you. Click on “go there now” (red arrow).
This will take you to a login screen. Login using the information from the previous step.
Scroll down to the “Public Profile Information” and add your email to your public profile. You can fill in the other fields as well if you want. When you are done, click on “Update Information”.
This will take you back to the forum. Click on Share Exchange.
- This will take you to the Share Exchange forum. This is the area, where you can request shares you want to purchase. You can see the subject (orange box), Author (green box), and Date (blue box). If you look in the blue box you will see that dates are a few years old. This is because you are at the beginning of the forum. You want to take a look at the most recent postings to see if anyone is selling the shares you want to buy. Click on “End” (red arrow) and this will take you to the newest postings.
- See if you can find any posting that are selling the share(s) you want to buy.
- If you don’t see the company you want to buy listed on this page, try taking a look at some of the previous pages by clicking on “Previous” (green box from above). In this example I’m going to assume you are looking to buy an Enbridge (ENB) share and you found it on the share exchange forum.
- You can also try searching for the company by clicking on “Search the Boards” (orange box from above). See step 20 for an example of how to search the boards for a company.
- If you can’t find the share you are looking for then you will have to post a comment requesting the share you are looking to buy along with your email so sellers can contact you. Go to step 24 for instructions on how to post a comment on the share exchange.
- If you were interested in buying Enbridge (ENB) you might click on “ENB for sale” (blue arrow from above) and contact the seller. By clicking on the post it will take you to the entire message.
- From here we can see that Gator has some ENB shares available. Email the seller to see if they have any shares still available. Before you buy from them it is usually a good idea to figure out if they are a reputable seller.
- The vast majority of the time, buying on the share exchange works outs fine. There has been the rare instance where someone tried to rip someone off. There are few steps you can perform to avoid this. The easiest method is to search the boards for previous comments. This is usually the only step you’ll have to take. If searching the board for prior postings doesn’t yield anything then try asking about the seller on the share exchange.
- Search the board for previous postings
- Most sellers on the board have done this before so you can search the share exchange board for their username to see previous posting. You should see a bunch of previous posting from when they sold shares in the past. If you don’t see any previous postings, then this is a red flag. It could be someone new and turn out fine, but just be aware the risk is higher. Step 14 has instructions on how to search the board and verify a reputation.
- Try clicking on a few of these comments and display the whole conversation by clicking on “Display Full Thread”. From here you will be able to see other people’s comments. Occasionally you see others commenting on posts thanking them for shares that they sold in the past. This is a good sign that the seller is legit.
- The share exchange is mostly people posting shares they want to sell or buyers looking for shares. People will usually comment if something went wrong, but not many people comment if everything went properly. With this in mind, an absence of negative comments is also a good sign.
- You can usually get a good idea of the seller’s reputation from just from searching the boards and reviewing past entries.
- Ask about the seller on the share exchange
- An easy way to verify the reputation is to ask if anyone else has bought shares from them and their experience with the seller. This will involve posting a comment on the share exchange which you will learn how to do at step 24.
- The share exchange is a pretty active forum, so it shouldn’t be long before someone replies. If you don’t hear anything after a day or two, this could be a red flag.
- The moderators and the community on the forum are pretty good, so people trying to rip people off will usually have one chance if that. After that everyone is aware of them.
- Search the board for previous postings
- In the share exchange forum you can search by clicking on “Search the Boards” (orange box from below).
- A search screen similar to the one below will show up. In this example we are searching for previous posts from the seller Gator to verify their reputation.
- The first thing you want to do is to change the Board to “Share Exchange” so that you aren’t searching the other forum topics as well.
- Enter the username in the “Author” box
- Next change the “From” date to something more recent so that you get more recent results. I recommend only searching back a few months, but this will depend on the results you get.
- Click on “Submit Search Request”
- Your search results will show up. The results are ordered from oldest to newest, so if you have more than 10 results you may want to click on “Next 10 Matches” until you have reached the end and are showing the most recent postings. In the example below I can see that there are 8 matches, so this isn’t an issue.
- Scan through the entries and see if you can find other examples of them selling shares. You can see that there are a few instances of this (shown below in the blue boxes). This is a good sign.
- Try clicking on a few of these entries to see if others have commented on their reputation. In this example I clicked on the comment in the red box below.
- Once you click on the comment the message will show up. From here you want to click on “Display full thread” to see all the comments associated with the thread.
- This will show the full conversation. You can see from the full thread below that keepitsimple is thanking other sellers for his purchase of shares. Gator who we are trying to verify the reputation of is listed as one of the sellers and the comments are good. This is a strong indication that Gator’s reputation is good.
- After performing these steps you should have a better idea of the reputation of the seller. In this example Gator has a good reputation, so I’d be comfortable purchasing shares from them. Skip to step 28 for instructions on how to buy a share once you’ve verified the seller’s good reputation.
- In the share exchange forum you can search for a company by clicking on “Search the Boards” (orange box from below).
- A search screen similar to the one below will show up. In this example we are searching for Bank of Nova Scotia which has a stock ticker of BNS. I’ve chosen to search for just “BNS”, but you could search for “Bank of Nova Scotia” as well if you want.
- The first thing you want to do is to change the Board to “Share Exchange” so that you aren’t searching the other forum topics as well.
- Next change the “From” date to something more recent so that you get more recent results. I recommend only searching back a week or two.
- Now enter in your search words. I chose “BNS”.
- Click on “Submit Search Request”.
- This will come up with your search results. The results are ordered from oldest to newest, so if you have more than 10 results you may want to click on “Next 10 Matches” (red arrow) until you have reached the end and are showing the most recent postings. In the example below I can see that there are 27 matches (red box). Scan through the entries and see if you can find someone selling your company. In the example below we can see that there is a posting that is selling BNS. Click on the posting (blue arrow), read the entire posting and then contact the seller to see if there are still shares available.
- If after completing the previous steps you are still unable to find a seller to purchase your share from, then you should make a posting on the Share Exchange requesting the share you want.
- From the share exchange click on “Post New”.
- If you aren’t already logged in you will have to login. Once you are logged in it will take you to a page that looks like this:
- In the example above I am trying to buy Bank of Nova Scotia, so I
- Filled in the subject,
- Added my contact information in the body of the comment, and
- Clicked on “Submit Message”.
- Once you hit submit it will take you back to the share exchange, and if you click on the “End” button you will be able to see the most recent comments. The one on the bottom should be yours.
- To contact the seller, you will email them and ask them if they have shares available. Once they have confirmed they have shares available they will need your share registration details and payment.
- Registration details will commonly include the name(s) and address you want the share registered to. You can also register shares jointly, in trust, or as a custodian account. (With some companies you will also have to fill out a Declaration of Ownership form sign it and mail it to the DRIP seller before the transfer form is mailed to the transfer agent. This form is not very common, but some companies like Emera, Manitoba Telecom, and a few others require it to complete a transfer.)
- Important Notes:
- I used to sell starter shares and consequently have done a large number of transfers. While not a lot of mistakes are made, the most common mistake I see is that the transfer agent will make a typo when registering the share. If the transfer agent is at fault you will likely have to mail them the share certificate and they will issue you another certificate. If you have an uncommon name, or two last names I would suggest telling the seller about this when you give the registration details so a note can be made on the transfer papers. I have had cases where a common name “Michael” is spelled in the less common way “Micheal”. The transfer agent won’t notice unless an additional note is made on the transfer papers and they register the share in the wrong name. Another mistake I notice sometimes is if you have two last names that are not hyphenated. The transfer agent will think that one of them is a middle name and the registration will be wrong.
- When the share is transfer from the seller’s account to yours one of two things will happen. A new account is setup for you, or its transferred into an existing account. If you already have other DRIPs with the same transfer agent and the registration details match your account exactly the share will show up in your existing account and you will be able to see it online before you receive it in the mail. This is why once you have provided your registration details the first time, I recommend keeping them exactly the same for future transfers so that the registration details match and the transfer agent adds new companies to the same account instead of making another account. Transfer agents can be very picky about this. For instance using “Unit 29″ instead of “Suite 29″ will create two separate accounts.
- Payment is usually done by email money transfer. In rare cases you can mail a cheque/check to the seller. Most sellers won’t accept a cheque/check because of the added time it takes to receive the cheque/check and confirm it clears the bank account.
- How much does it cost? When you buy shares from a seller you will have to pay the stock price + $10. Additional fees could include the bank fee to send an email money transfer or the price of a stamp if you have to mail something to the seller.
- Email Money Transfers are initiated online from your bank account in most cases. Most of the time your bank will charge you a fee (usually a dollar or two) to send an email money transfer. A notable exception is the bank Tangerine (formerly ING Direct), which offers free email money transfers among other things. They are a great no fee bank in general and if you are interested in opening an account they offer a $25 signup bonus if you open an account with $100 use the referral code: 17002298S1
Related article: Which Canadian Free Chequing Bank Account Is For You?
- Once you’ve paid the seller and they mail out the transfer forms you will receive your share certificate or DRS account statement typically within 3 to 8 weeks. Congratulations you are now the proud shareholder of a company and can enrol in the DRIP and SPP.
- Sometimes you get a DRS statement instead of a share certificate. A DRS statement is just proof that you own the share in electronic form. It depends on the company which one you will get. DRS statements are more common with US DRIPs. When you receive the share certificate or DRS statement there will be an account number on it that you use to register for the DRIP and SPP.
- It can be unnerving emailing someone you’ve never met money and then having to wait 3 to 8 weeks to receive the share certificate. This is why it is important to verify the reputation of the seller before you pay them. Go back to step 13 if you need a refresher on how to check the reputation of a seller.
- It also helps soothe the nerves if you understand the transfer process and typically how long it takes as 3 to 8 weeks is a wide range. Most transfer agents in reality will take 3 to 5 weeks, with the exception of Canadian Stock Transfer which will typically take 5 to 8 weeks. If you are enrolling in a company DRIP from your country it will be closer to the lower end of the range. If it’s an international DRIP you want to enrol in, then it will take longer and be at the higher end of the range. A lot of the delay comes from mailing time, so if the seller or you are in close proximity to the transfer agent’s office then the process will typically be quicker. The opposite is true if the seller or you live far away.
- It can be useful to know what stage in the process you are if you are trying to guess how much longer your share will take to receive, so I’ve explained the process in detail below. This will also be useful information if you are considering becoming a seller of starter shares.
I found a flow chart that I used to share with buyers back when I sold shares to prospective DRIPers. It showcases the process nicely so I’ll start with this and then go into more detail below.
Once the seller has received payment and your share registration details they will fill out the transfer form with your registration details and other relevant information. In rare cases with US transfer agents the seller can request a transfer through the transfer agent’s online system.
The transfer form needs to be stamped by someone at a bank to verify the seller’s identity. The seller will get the transfer form/share certificate stamped with either a Medallion Signature Guarantee (Good for Canadian and US transfers) or a Signature Guarantee (Canadian transfers only) at a bank.
Getting this stamp can be difficult as not all banks have the stamp and it’s not something everyone knows about. Bank of Montreal is the only bank at the branch level that I know of that offers the Medallion Signature Guarantee in Canada. Keep this in mind for US transfers. I generally recommend that sellers get a Medallion Signature Guarantee because I haven’t heard of transfer agents rejecting the transfer request when the Medallion stamp is used. I have heard of signature guarantees from CIBC being rejected because the bank hadn’t kept their signatures up to date in the system.
Once the seller has the forms stamped by the bank they mail them to the transfer agent. This will typically take a week, but it depends on where the seller lives and how far they are from the transfer agent.
The transfer agent will process the transfer request. This is when the shares are taken out of the seller’s account and a new account is created or the share is transferred to an existing account if the buyer has other DRIPs with the transfer agent with the same registration details. The seller if they login to their account with the transfer agent online will be able to see the shares removed from their account. If the buyer already has other DRIPs setup with the same transfer agent and the registration details are the same then most of the time the buyer will be able to see the share in their account within a day or two of them being removed from the seller’s account. I’ve found that while this usually happens, it isn’t 100% so if the share isn’t showing up in the buyer’s account online they will have to wait to receive the share in mail and use it to register online. The buyer can also call the transfer agent and have it added to their existing account once they’ve received the share in the mail.
When the share is removed from the seller’s account it will typically take another week or two before the buyer receives the share certificate. The one exception is if the transfer agent is Canadian Stock Transfer, in which case it will usually take another two to three weeks.
The time it takes for the transfer agent to process the request can vary widely on the transfer agent. I’d say on average it’s about a week or two. I have noticed that Computershare is quite quick and sometimes has them processed in a day or two, but other transfer agents are around a week or two. Canadian Stock Transfer is not very quick and can take longer than this sometimes.
Once the transfer agent processes the request they will mail out the share certificate or a DRS account statement. Most transfer agents will mail out the share certificate or DRS statement to the address that was used to register the stock (The buyers address). This usually takes a week or two. If you bought the share of a company in another country then it will probably take closer to two weeks. With most transfer agents this would be the last step as the buyer will have received the share certificate or DRS statement in the mail directly from the transfer agent. If however the transfer agent is Canadian Stock Transfer (formerly CIBC Mellon) then it could take longer.
Most of the time the seller will be transferring multiple shares at a time, so Canadian Stock Transfer (formerly CIBC Mellon); to save on mail costs, will mail all the shares back to the seller and then the seller will have to disburse the shares to the various buyers. This adds an extra two to three weeks, because it takes a week or two for the seller to receive the share from Canadian Stock Transfer and then another week to mail it to the buyer. In some cases where the seller is only transferring one share Canadian Stock Transfer may mail it directly to the buyer. Even in these cases it sometimes will still be mailed back to the seller. I found it difficult to predict what Canadian Stock Transfer will do, but most of the time they send the share certificate back to the seller and the seller mails it to the buyer.
By now you should have a share in your name which means you can sign up for the DRIP and SPP through the transfer agent. This will usually involve mailing some forms to the transfer agent or signing up through the transfer agent’s website. Once you’ve done this you’ll be up and running. Congratulations! I hope you found the guide useful.
- What Is A Dividend Reinvestment Plan (DRIP/DRP)?
- Pros & Cons of a Traditional Dividend Reinvestment Plan (DRIP/DRP) with a Share Purchase Plan (SPP)
- Things to consider before buying a share and enrolling in a dividend reinvestment plan (DRIP)