In What is a DRIP? we learned that it is possible to have our earned dividends be automatically re-invested to buy more shares in the great companies we own (and hence the name Dividend Reinvestment Plan).
You be asking yourself, “Great, where do I sign up”. Sadly, real DRIPs can be a huge pain in the butt for three simple reasons.
|1) Collect names of the participants||Mar 4||I asked DripInvesting.org if anyone was interested in aquiring their first share of FTS|
|2) Coordinator buys the shares||Mar 6||I purchased 24 shares of FTS from e*trade|
|2b) Share Certificate Request||Mar 6||A request with e*trade for the actual share certificate made (costing $75)|
|3) Send a cheque plus SASE||Mar 18||I received all cheques from participants including a elf-addressed-stamped-envelope (SASE)|
|4) Complete Securities Transfer Form||Apr 9||I filled out 23 transfer forms to coordinate the first share with the group|
|4b) Signature Guarantee||Apr 12||I visited a physical BMO, explained what the heck a DRIP was, and got them to sign the forms|
|5) Deal with problems||Apr 26||Every single share transfer I have done has had some issue. In this case the Signature Guarantee from BMO was rejected as it was a “normal” guarantee, not a Gold Medallion Stamp|
|5b) Resolve problems||May 1||Visited a BMO during the week, and got an official Gold Medallion Stamp|
|6) Mail transferred certificates||Jun 4||New shares arrive and are distributed to the participants|
After 4 months, a few visits to the post office and physical banks we had acquired our first share of Fortis (FTS). Not exactly a pleasing experience, and not what I would call efficient.
Back when I started DRIPping, the process of adding more shares to your account was also cumberson. You would complete a Purchase Instruction Form and send along a cheque. Each company processed additional purchases differently, but it would be weeks or months before a purchase would be made.
You can now make electronic deposits, so the majority of the pain is now just in that first share.
Real DRIPs are not all bad, and do have some amazing up-sides (once you get past the hard parts above) including
Let’s say that you are OK with the cumbersome setup process because those benefits are too good to pass up, we still might have a problem; namely the company might not even offer DRIPs.
And just because a company does offer a real DRIP, does not mean it will maintain it. Recently, Enbridge halted their drip program.
I was a real DRIPper for over a decade, and I can appreciate how cool it is to have all my dividends automatically re-invested so I can really just set-it-and-forget-it. But, once I learned about Synethic DRIPs (as we will in the next article) I have all but left my real DRIPs behind.