Should I DRIP my Canadian Couch Potato Portolio?

[SkimGuy]

Hi everyone,

I was just wondering if I should use DRIps on my portfolio. I probably won't do it in my non-registered account since it would be a pain to calculate ACB for tax purposes but for my non-registered accounts, is it recommended?

I have US ETFs in my RRSP - VTI and VXUS. Would they be DRIP eligible?

In my TFSA, I have VAB and ZRE which should be eligible. I think I will DRIP those. Right now I don't have much in my TFSA, but as it grows in size it will start to make a difference.

Are there any costs associated with enrolling in DRIPs? Any considerations or advantages/disadvantages that I might not be aware of? I'm with Questrade if it helps.

Thanks

[Allen32]

If your in for the long term... Why would you not want to DRIP the shares? That is really the goal of a passive investment strategy.

Most securities are eligible for synthetic DRIP but confirming each would be best as some may invest in treasury (so you many get actually get a discount) as opposed to common shares. ETF's generally are mostly all DRIP eligible. Please consult the prospectus which will generally tell you.

Questrade & most brokers will only synthetic DRIP on whole shares and do not charge for this service.

I provided some calculations for you below as a reference how many shares it takes for the securities you have. These are based on July 25, 2012 close from TDW:

VAB:
Div per Share: $0.0692
$ to DRIP 1: $9,623.71
Shares to DRIP: 374

ZRE:
Div per Share: $0.0833
$ to DRIP 1: $5,292.00
Shares to DRIP: 252

VTI:
Div per Share: $0.3303
$ to DRIP 1: $14,150.16
Shares to DRIP: 207

VXUS:
Div per Share: $1.2910
$ to DRIP 1: $1,341.64
Shares to DRIP: 33

[S5]

That VXUS distribution info is incorrect. Although they say the distributions are quarterly, they actually have been annual. Last December it was $1.291 per share.

VTI is quarterly and will vary, here's what recent history has looked like. https://personal.vanguard.com/us/funds/snapshot?FundId=0970&FundIntExt=INT#hist=tab%3A4

What happens to USD dividends inside RRSPs at Questrade? If they get deposited in a USD subaccount then it comes down to personal preference and how often you intend to make additional purchases. At TDW it makes sense to DRIP them so they don't get converted to CAD, avoiding currency exchange fees on the full shares.

Skim, I'd lean to dripping your registered accounts if Questrade has your ETFs on their list.

[Allen32]

That VXUS distribution info is incorrect. Although they say the distributions are quarterly, they actually have been annual. Last December it was $1.291 per share.
Corrected. Was just going by Vanguard published information.

[SkimGuy]

Ok thanks for the advice. I'll enroll in drip for my ETFs instead of just sitting on my dividends :)

[Daf]

Just started looking into this more and more, and would love to get more involved in this, if anyone wants to let me buy one certificate off them, please let me know, so I can start a DRIP program.

Interested in REITS right now but if its a good company I'm in!

[Stryker]

Just started looking into this more and more, and would love to get more involved in this, if anyone wants to let me buy one certificate off them, please let me know, so I can start a DRIP program.

Interested in REITS right now but if its a good company I'm in!

How do I start a DRIP without going through a broker? (http://www.theglobeandmail.com/globe-investor/investment-ideas/how-do-i-start-a-drip-without-going-through-a-broker/article4443464/)

JOHN HEINZL
The Globe and Mail
Published Thursday, Jul. 26 2012, 7:46 PM EDT
Last updated Thursday, Jul. 26 2012, 7:46 PM EDT

I’m interested in starting a dividend reinvestment plan (DRIP). How can I buy my first share without going through a broker?

[SkimGuy]

That VXUS distribution info is incorrect. Although they say the distributions are quarterly, they actually have been annual. Last December it was $1.291 per share.

VTI is quarterly and will vary, here's what recent history has looked like. https://personal.vanguard.com/us/funds/snapshot?FundId=0970&FundIntExt=INT#hist=tab%3A4

What happens to USD dividends inside RRSPs at Questrade? If they get deposited in a USD subaccount then it comes down to personal preference and how often you intend to make additional purchases. At TDW it makes sense to DRIP them so they don't get converted to CAD, avoiding currency exchange fees on the full shares.

Skim, I'd lean to dripping your registered accounts if Questrade has your ETFs on their list.

Yeah the US dividends I received as of July were held in my USD margin account. I think you have to elect to have your dividends held in the currency in which they were traded when you set up your account.
I'll do the drip thing on Monday. lol
I have a question though, do you need to earn the minimum amount of a share price in order to purchase a share automatically? Lets say a stock costs 50$, but I only get a 20$ dividend. Of course I won't be able to buy a stock, but when I get >50$ in dividends, would it make the purchase automatically or does it stay in my account since it didn't meet the requirements to buy at least 1 share in the first place? If you need to earn at least 1 share per dividend, then it would require a pretty big portfolio :(

[Allen32]

I have a question though, do you need to earn the minimum amount of a share price in order to purchase a share automatically?
SkimGuy;
See my 1st post... It tells you how many shares you need to drip 1 share. Of course this will vary depending on the share price at time of purchase.

[FunSave22]

If you only have a small portfolio mutual funds are probably a better place. And they will drip partial shares.

As for stocks, the dividend from one distribution needs to be enough to buy a whole share in order to get a share. You can't add up dividends from multiple distributions to try to get the minimum.

[SkimGuy]

SkimGuy;
See my 1st post... It tells you how many shares you need to drip 1 share. Of course this will vary depending on the share price at time of purchase.


If you only have a small portfolio mutual funds are probably a better place. And they will drip partial shares.

As for stocks, the dividend from one distribution needs to be enough to buy a whole share in order to get a share. You can't add up dividends from multiple distributions to try to get the minimum.

Thanks guys. Guess I'll hold off until I can DRIP at least 1 share :P (Need more RRSP/TFSA contribution room! lol)

[S5]

Surely you have enough to drip VXUS' annual distribution. The other leftovers will have to wait for your next contribution.

[SkimGuy]

Yeah I have enough for VXUS, I guess I'll submit my DRIP request forms all at the same time for convenience.

[Terrific_Deals2k8]

Short answer is YES. Best way to reinvest at a cost-free basis (isn't that the RFD mantra?) ;)

[S5]

That VXUS distribution info is incorrect. Although they say the distributions are quarterly, they actually have been annual. Last December it was $1.291 per share.

And I now understand why the Vanguard website was "incorrect".:o All Vanguard's international ETFs are moving to quarterly distributions starting in September. https://personal.vanguard.com/us/insights/article/fund-announcement-02292012


The first quarterly dividend payment will be made in September 2012 and will
include income earned from the first through third quarters. The fourth quarter
payment will be made in December 2012.
http://www.vanguard.com/funds/reports/p3369etf.pdf?cbdForceDomain=true

[SkimGuy]

And I now understand why the Vanguard website was "incorrect".:o All Vanguard's international ETFs are moving to quarterly distributions starting in September. https://personal.vanguard.com/us/insights/article/fund-announcement-02292012


http://www.vanguard.com/funds/reports/p3369etf.pdf?cbdForceDomain=true

Ugh, with that information, I won't be able to get a share of Vanguard.
If we go by the current share price (45.00), I'd need at least 140 shares if we assume the divivdend is the same as last year, divided by 4 (1.291/4 = 0.32275). I only have 128 shares lol

Oh well, I guess there's always next year when RRSP room increases. :)

[S5]

Ugh, with that information, I won't be able to get a share of Vanguard.
If we go by the current share price (45.00), I'd need at least 140 shares if we assume the divivdend is the same as last year, divided by 4 (1.291/4 = 0.32275). I only have 128 shares lol

That's true of the quarterly distributions but the September one will only require about 47 units since it's for 9 months..