How to buy a share on the DRIP Investing Resource Center’s share exchange

B&O RR common stock

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.

Related articles: What Is A Dividend Reinvestment Plan (DRIP/DRP)? and Pros & Cons of a Traditional Dividend Reinvestment Plan (DRIP/DRP) with a Share Purchase Plan (SPP)

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

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Things to consider before buying a share and enrolling in a dividend reinvestment plan (DRIP)

Question mark

Before buying your first share so that you can enrol in a dividend reinvestment plan (DRIP) there are a number of considerations you should go over first. The easiest way in my opinion to become a shareholder in a company so that you can enrol in the company’s DRIP and SPP is to enrol through the Direct Share Purchase Plan (DSPP). An important first step is checking to see if a DSPP exists for the company you are interested in. If a DSPP exists then you don’t have to go through the hassle of buying a single share, you can simply start investing in the company directly through the transfer agent.

Related article: Pros & Cons of a Traditional Dividend Reinvestment Plan (DRIP/DRP) with a Share Purchase Plan (SPP)

Most Canadian companies do not offer a DSPP, but a number of US companies do. A notable Canadian exception is Fortis, but it only offers a DSPP through their transfer agent Computershare to residents of NL/Labrador & PEI. Here are some resources if

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Pros & Cons of a Traditional Dividend Reinvestment Plan (DRIP/DRP) with a Share Purchase Plan (SPP)

You Big Wet Drip

A dividend reinvestment plan (DRIP) is a plan for shareholders of a company that allows them to reinvest their cash payment from dividends with the purchase of more shares in the same company. There are two types of DRIPs, a synthetic DRIP and a traditional DRIP. A synthetic DRIP is a plan that is provided by your broker and administered by them. A traditional DRIP is a plan offered by the company and administered by a transfer agent.

Related article: What Is A Dividend Reinvestment Plan (DRIP/DRP)?

A share purchase plan (SPP) allows investors enrolled in a traditional DRIP to buy more shares of the company through the transfer agent. Most investors don’t setup a traditional DRIP unless the company also offers a SPP as they want to be able to buy more shares as well as reinvest their dividends.

In this article I’m going to talk about the advantages (Pros) and disadvantages (Cons) of a traditional DRIP with a SPP. The article is very long (over 5,000 words) so I’ve summarized the pros and cons here. You can jump between

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What Is A Dividend Reinvestment Plan (DRIP/DRP)?

When Water Drops Collide

A dividend reinvestment plan (DRIP) is a plan for shareholders of a company that allows them to reinvest their dividends with the purchase of more shares. In most DRIPs, when the cash from the dividend is used to buy more shares there is no fee/commission charged. This is the main advantage of a DRIP, low or no fees. There are other advantages too, but I’ll go into those later on.

There are two types of DRIPs, a synthetic DRIP and a traditional DRIP.

Synthetic DRIP

A synthetic DRIP is a service offered by your broker. It depends on your broker, but most will not reinvest in fractional shares. This means that you’d need enough dividends from one payment to cover the cost of the share. To enrol in a synthetic DRIP, you have to contact your broker and ask to be enrolled. It doesn’t normally cost anything to enrol in a synthetic DRIP.

Traditional DRIP

A traditional or true DRIP is the plan that is offered by the company. The company uses a transfer agent to administer the plan. Through the transfer agent you can reinvest your dividends to buy fractional shares.

… Continue reading What Is A Dividend Reinvestment Plan (DRIP/DRP)?