Author Archives: BetCrooks

Pros and Cons of Using a DRIP for BMO InvestorLine Dividends

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A Dividend Re-investment Plan, or DRIP, is a way to get paid dividends in shares of the company rather than in cash. This share purchase does not cost a fee. Often, there is also some incentive to the investor. For example, shares may be offered to purchase at a small discount to their usual price. BMO InvestorLine offers a DRIP plan to investors.

Written: 2014
Reviewed: 2023
Revised: 2023

Real DRIPS versus Synthetic DRIPs

In a true DRIP, if the shares are held directly and managed personally with a transfer agent such as ComputerShare, you can often buy “partial” shares if the balance of your earned dividend will not buy another whole share. For example, if shares cost $10 and your dividend payment is $18, you would get one whole share, and 0.80 of another share.

Some online brokerages offer modified forms of DRIPs called synthetic DRIPs. The BMO InvestorLine synthetic DRIP is very similar to a DRIP, but there are a few differences.

PROS of a Synthetic DRIP with BMO InvestorLine

For beginning investors who have small accounts, a DRIP, synthetic or otherwise, can be a sensible and cost effective way to increase investment in a company. Because there is no commission or fee on the purchase of the new shares via the DRIP, it is possible for an investor to slowly increase their holdings for no cost.

A DRIP also gives a no-cost way to reinvest most of the money earned as dividends. For investors with small holdings, the small dividends would often not be reinvested quickly without the no-fee DRIP option.

Reinvesting monthly or quarterly when the dividends are paid also allows the investor to benefit from dollar cost averaging. If the price of the shares is down when the re-investment is made, then the investor will receive more shares. If the price is up, the investor will receive fewer shares. In theory, the investor should do better than if they simply purchase all the shares at one time, which might be at a time when the cost is high per share.

At BMO InvestorLine, you can choose to enroll none, some, or all of your stock holdings in DRIPs, if they are eligible. You do not have to enroll all of your stocks if you don’t want to. For example, you could enroll your BMO and TD shares, but still receive cash dividends from your BCE and CNR holdings.

There is no cost to enroll in the BMO InvestorLine DRIP program.

CONS of a Synthetic DRIP with BMO InvestorLine

You cannot buy partial shares with a BMO InvestorLine synthetic DRIP. So in our example of $10 shares and a $18 dividend, you would receive 1 new share and $8 cash paid to your cash account. InvestorLine will buy as many whole shares as possible before paying the balance out as cash.

Not all companies offer a DRIP through BMO InvestorLine. (In fact, not all companies offer a DRIP any where. Some companies are not interested in offering this option to their investors.)

Some companies require a certain minimum number of shares before allowing an investor to enroll in a DRIP.

The BMO InvestorLine DRIP is only available to residents of Canada.

It is not easy to check whether a company is offering the same discount share purchase price to an investor using a real DRIP as to an investor using a BMO InvestorLine synthetic DRIP. It appears you would have to contact the Investor Relations department for each company you are interested in, and ask them. (Or, since there is no fee to enroll in the BMO InvestorLine DRIP, you could enroll, accept one DRIP dividend payment, and check the math to see whether the discount was applied.)

How to Enroll for DRIP via BMO InvestorLine

BMO states that you should first check with the investor relations department of a company to confirm that it offers a DRIP and to check what is the minimum number of shares the investor must own to qualify. That said, they do list on the BMO InvestorLine site a huge list of companies that offer DRIP.

To enroll in a DRIP for a specific stock, you can phone BMO InvestorLine and discuss it with an agent. The number to call within Canada is 1 888 776 6886. The hours are 8 to 8 Eastern Time, Monday to Friday. (In 2021, they had an online method being tested to allow enrollment but it seems to have been discontinued in 2022.)

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How Health Spending Accounts (HSA) Benefit You and Save You Money

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Health Spending Accounts allow you to pay for legitimate medical expenses with pre-tax dollars instead of post-tax dollars. For example, if you buy corrective lens prescription eyeglasses to see better, you could pay for them with money from your pay cheque. That is after tax money, as you have already paid income taxes on part of your salary before you receive your pay cheque. Or you could pay for the eyeglasses from a Health Spending Account with dollars on which you have not paid any income tax. HSAs can benefit you and help you save money.

Written: 2013
Reviewed: 2023
Updated: 2023

Health Spending Accounts Help You Save the Big Bucks on Medical Expenses

If you are in a typical Ontario tax bracket, you could be saving 20-31% on your eyeglasses by buying them using pre-tax dollars. If they are $300 eyeglasses, that’s a $60-$93 savings. If you have a family of four whom all need new eyeglasses, it can save you quite a bit.

Only “Real” Medical Expenses are Covered by HSAs

It is a “Health” spending account, so you can only pay for items and services that meet the Canada Revenue Agency criteria for medical expenses. If you can’t claim it as a medical expense on your regular income tax return, then you can’t claim it as a HSA expense either.

For 2022, there is a list of typical medical expenses on the Canada Revenue Agency website at

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4065/medical-expenses.html#toc5

How Do I Get a Health Spending Account?

Many employers offer HSAs as an employee benefit. Occasionally, your employer will deposit the money into your HSA. Often, you have to deposit your own money (before you ever get paid it, and therefore before you pay tax on it) into the account. Then, when you have an expense, you file the paperwork to prove it is an acceptable medical expense. The company managing the Health Spending Account then sends you a cheque or direct deposits your refund.

Can You Have a Health Spending Account If You are Self-Employed or Work for a Small Company?

You can have an HSA if you are self employed. A one-person incorporated business can set up an HSA and the “employee” and immediate family dependents can make claims up to an annual maximum.

The small business (and you can’t get much smaller than a one-person corporation!) then must hire a third party to administer the account.

Why Bother? Can’t You Just Use the Medical Expense Tax Credit Instead of a Health Spending Account?

The trick is that the medical expense tax credit only applies after you have spent a large amount of money. The first couple of thousand dollars that you spend is not eligible for any credit, unless your net income was less than a value set by the CRA rules. The Health Spending Account is used to get a tax break on even the first $10 you spend on medical expenses.

Is a Health Spending Account (HSA) the Same as a Health Care Spending Account (HCSA)?

Yes. A Health Spending Account (HSA) and a Health Care Spending Account (HCSA) are both just different names for the same thing. The primary difference is that spell check will not keep switching the letters HCSA into HAS like it does with HSA!

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Do you participate in an HSA? Have you saved much money? Have you had to change your spell checking program to stop automatically converting the phrase HSA into HAS? Please share your experiences with a comment.