Real DRIPs are Hard

March 18, 2019

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.

Buying the first share

Here’s a actual time-lime for how I setup a DRIP of Fortis FTS with Computershare. Depending on the stock, the share certificates might be managed by AST (which was formerly CIBC Mellon).

1) Collect names of the participantsMar 4I asked if anyone was interested in aquiring their first share of FTS
2) Coordinator buys the sharesMar 6I purchased 24 shares of FTS from e*trade
2b) Share Certificate RequestMar 6A request with e*trade for the actual share certificate made (costing $75)
3) Send a cheque plus SASEMar 18I received all cheques from participants including a elf-addressed-stamped-envelope (SASE)
4) Complete Securities Transfer FormApr 9I filled out 23 transfer forms to coordinate the first share with the group
4b) Signature GuaranteeApr 12I visited a physical BMO, explained what the heck a DRIP was, and got them to sign the forms
5) Deal with problemsApr 26Every 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 problemsMay 1Visited a BMO during the week, and got an official Gold Medallion Stamp
6) Mail transferred certificatesJun 4New 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.

Buying more shares

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.

DRIP Benefits

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.

All Is Not Lost

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.