Dividend Reinvestment Plans | Investing for Canadians

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I do not use Plans for 4 primary reasons. Do you automatically your dividends? In this video, I describe why I do not.

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37 Comments

  1. 📈📚 Join The Investing Academy ➤ https://bit.ly/theinvestingacademy

    Do you have a DRIP set up for your stock dividends? I don’t. In this video, I’ll explain why I choose to manage my own portfolio dividends, and the pros and cons of Dividend Reinvestment Plans. Hope you enjoy.

  2. #7. I already vetted these businesses( wrongly or rightly) so why not buy more with no commission?

    Except it’s fun to buy the stock and hit the buy button. And I’d rather choose myself… there might be something I think is better.

    Like, when the CP Kansas deal finally goes through I’ll want to switch out those CNR stocks for CP.

  3. Well the pro for me using a drip is the simple fact that since I inherited a portfolio with IG and they charge $50 per trade, it just makes sense for me. These are long hold blue chip holds for me but I understand your view completely Marc.

    1. You have the ability to transfer the contents of that IG portfolio to any other brokerage, usually at no cost, as the receiving brokerage will almost certainly pay your fees. But, as a POW investor, I hope you don’t 😉. Just kidding, you should definitely explore your options and make sure you take every opportunity to reduce your fees.

  4. I’m more hybrid with the drip. When we are in a bear market like we are now, I prefer having the drip on since most of my stocks are in undervalued territory and it saves me on fees. In a bull market, I’ll definitely remove the drip.

  5. Certain stocks I have a drip set up on. Like Enbridge and Manulife. Typically those stocks don’t go up a huge amount, and are more so a dividend growth strategy. So a drip makes more sense.

  6. Can you deep dive into the taxation part for the dividends earned? Are dividends taxed in Canada in the TFSA/RRSP account or the regular trading account?

    1. Marc has a playlist on this channel and he has a few vids where he discusses taxation. Maybe some of them might address your questions?🤔🇨🇦

    2. No, just like capital gains, there are no taxes on dividends received in a TFSA or an RSP. Of course, in the case of an RSP, the withdrawals are taxed as income and do not benefit from the eligible dividend tax treatment in a non-registered account. Also, US dividends received in a TFSA (but not an RSP) are subject to the 15% withholding tax from the IRS but that does not affect Canadian taxation as you are receiving the dividends net of the withholding tax into a tax free / tax deferred account.

  7. Watched and liked, thanks Marc! I use DRIP and DCA. I’m mostly an income dividend/covered call ETF cash flow type investor, but don’t currently use the funds. Any excess amounts that don’t DRIP I just keep as cash in portfolio and grow that position to use in times of correction.

  8. Thanks Marc, always good food for thought & a reminder to consider different ideas in balancing one’s portfolio.

  9. Yes, I started out with Drips for some of the reasons you mentioned. Over time I evolved to understanding more about indicators on stock charts and when to notice a stock is in a pull back mode. This meant I decided to stop the drips, also because most showed gains due to holding them on for so long i.e. the prices had risen. Now I let it accumulate as cash, only a drip if it shows a considerable low prices due to pullback or bad company news. It is nice to see the money as cash come in mostly monthly. Thank you Marc! Great topic👍💯🇨🇦

  10. I don’t know if this is common, but TD has been offering a 2% discount on their own stock prices purchased through DRIP for the past 2 dividend payments… that’s an automatic return of 2% which is welcome.

    1. @Don Yaschuk Yeah, and TD announced that there will be another 2% DRIP discount at the Jan 31 2023 payment. This discount alone is worth doing DRIP imo… unless you no longer want to invest in that stock

    2. Thanks for mentioning that, Nicol. Always a nice bonus if you can get that automatic discount – Marc

  11. I regularly dollar cost average into VFV, and VDY. DRIP is always on for me, since I have no individual stocks to allocate dividends into. As hands off as it gets. Sit back, and watch the snowball grow. I can see why a stock pickers would prefer allocating the distributions to specific holdings based on what’s on sale.

    1. Thanks for sharing your strategy, Noel. Sounds like you’ve got things under control. 👌 – Marc

  12. Great topic Marc, I enjoyed it a lot. I find DRIP works well with ETFs, especially if your broker’s commission charges are relatively high compared to the rest of the industry.

  13. great video Marc. very knowledgeable. and very appreciated. ive learnt so much from both of you over the years of watching you. i have “Smashed” every like button on your videos.

  14. Honestly the amount of knowledge and experience you provide to us here is unimaginably valuable and I really thank you for all of it. You changed everything I know about investing.

  15. Very interesting perspective. I’ve always believed in DRIPs, but you made me doubt about my belief. It’s true that DRIPs can hurt your returns if it buys a declining share when you could buy other stocks for a better value instead.

    1. Thanks for sharing your thoughts. Yes, I feel it’s always good to look at various strategies and then settle on what works best for you. – Marc

  16. For me, I’m fully DRIP. I am not aligned with the idea that I can set aside my dividends and more optimally reinvest them in the future. I have contemplated not DRIPing in order to set aside cash to purchase a different (new to me) company’s stock, but it would take too long to buy a significant enough position this way and while I’m waiting I miss out on on the compounding of my DRIP stocks. I can’t get passed that the “waiting for a better opportunity” strategy is market timing for me. I don’t think it’s any different then trying to decide if I should sell MFC to buy more ENB. It’s not for me. I guess it’s partly that, in my experience, the type of blue chip companies that I hold tend to move in similar trends. They go up and down with the market (I mean – they kind of are “the market”) so, trying to predict how one of them might behave differently is too risky, relative to the potential reward. But, I agree, it’s no fun to get my BNS DRIPed shares and then watch BNS sell off – but I don’t think I can predict when that will, or will not, happen.

    1. Thanks for watching James, as always. I always enjoy reading your comments, which are full of great thoughts and ideas. Cheers. – Marc

  17. My wife and I are going to start Questrade accounts in the new year. I agree completely with this video. we will start by buying high yield shares to start but only so we can use it to finance more secure long term stocks. I’m 49 and have nothing saved for retirement and need to take the lead out and go aggressive for a bit for the head start. I will need the dividend income to support myself later on.

  18. Marc you make some very valid points. When I started investing I turned DRIP on so that I would get full benefit in the companies that I already had checked out and felt strongly about. I might turn it off later on but time will tell

  19. Very good information! I will surely consider this when my situation changes… but with Questrade’s 5$ fees, small positions and a sub 40k portfolio, unless everything is pooled into a single position and complemented by extra deposits, the fees just kill the benefits. With most stocks being down right now, income savings going mostly to HISA (ARM, recession safety net, etc), letting DRIP do the DCA work across the board seems like a no brainer. But again, very good points on when shifting to a more active strategy would make more sense. Thanks!

  20. There was one PRO reason completely missed with DRIP. Some companies (this is not a rule but it happens) have a bonus share portion for DRIP. Meaning they give you percentage discount when you’re buying a share via DRIP and not via order. So you can get easily 15% discount on proce for the share you just bought compared to putting up an order.

    1. Thanks for mentioning that, Oscar. Used to be much more common, but like you say, there will still be opportunities to get this advantage. Cheers. – Marc

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