A common benefit of Dividend Re-investment Plans, DRIPs, is that you may be able to buy additional shares in a company at a discounted price with your dividend payment. This type of discount is available to registered shareholders who are direct participants in dividend reinvestment plans and it may also be available to
non-registered share owners who participate in a DRIP through an intermediary such as a discount brokerage.
For example, in 2013, if you reinvest your dividends from Fortis through a DRIP, you are entitled to purchase your shares at a 2% discount on the market price if Fortis issues new shares to participants in its DRIP plan. (Fortis can elect to simply buy shares at the market price to reinvest dividends. If it buys the shares, it does not provide a discount.)
So if I owned shares in Fortis that were registered in my own name, I could register for a DRIP for them with ComputerShare, the plan agent for Fortis.
However, what if I hold the shares in Fortis through my online discount broker, BMO InvestorLine? In that case, the shares are not registered in my own name. BMO is my agent.
I know that I can register my shares for a synthetic DRIP by phoning InvestorLine. What I didn’t know was whether I would also be eligible for any discount offered by Fortis for reinvesting dividends in shares. So I sent a query through MyLink, InvestorLine’s secure email program, to ask.
The InvestorLine MyLink representative replied, “You will receive the same discount on the DRIP program through us. It will be reflected on the DRIP price and pass through to you.”
In other words, if Fortis is not offering a discount, perhaps because it is buying shares from the market to meet the dividend reinvestment need, then the InvestorLine synthetic DRIP will also not offer a discount. If Fortis is offering a discount, most probably because it is issuing new shares to meet the dividend reinvestment need, then the InvestorLine synthetic DRIP will match the discount.
Key Differences Between the InvestorLine DRIP and a Direct DRIP
If you are the registered owner on record of Fortis stock, and you enroll directly in their DRIP with ComputerShare, you can buy fractional shares of the stock with your dividends.
If you use BMO as your agent and you are not the registered owner on record for the stock, and if you enroll in the synthetic DRIP through InvestorLine, you will not be able to buy fractional shares of the stock. Instead, your dividend payment will be used to buy as many full shares as possible, and the remaining dollars will be paid into your InvestorLine account as cash.
A Further Question about Purchasing Additional Shares for No Fee
I am still researching whether it is possible to buy additional shares on the dividend reinvestment date for no commission or fee when using an InvestorLine synthetic DRIP.
- Pros and Cons of Using a DRIP for BMO InvestorLine Dividends
- Can I DRIP US Stocks Using BMO InvestorLine?
- Fortis Inc Amended and Restated Dividend Reinvestment and Share Purchase Plan
Do you participate in any DRIPs with your discount brokerage? Please share your experiences with a comment.