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Can I DRIP the Dividends from my BlackRock iShares ETFs at BMO InvestorLine?

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BlackRock iShares ETFs are very popular with investors, with over 12 billion dollars invested in the S&P TSX Fund alone. Over the past few years, there has been some discussion on the internet about whether it is possible to use a synthetic Dividend Reinvestment Plan, DRIP, at BMO InvestorLine for iShares ETFs.

The answer is:

It depends.

Does InvestorLine Offer a DRIP for iShares XIU, XBB, XCB, XSB or XSP ETFs?

Three of the largest Canadian ETFs offered by iShares are the DEX Bond fund XBB, XCB and XSB. At the time this was written (2013 January), InvestorLine did not offer a DRIP for these ETFs.

UPDATE: February 2014: You can DRIP XBB, XCB and XSB at InvestorLine.

Two of the other largest Canadian ETFs offered by iShares are XIU based on the S&P TSX 60, and XSP based on the CAD-hedged S&P 500. These are also not available to DRIP through InvestorLine at this time.

UPDATE: February 2014: You can DRIP XIU and XSP at InvestorLine.

XRB, XHB, XGB, XLB, XFR, XSH, other iShares DEX bond funds, are also not available to DRIP.

UPDATE: February 2014: You can DRIP XRB, XHB, XGB, XLB, XFR, XSH and many other iShares funds at InvestorLine.

InvestorLine Does Offer a DRIP for iShares CBO, CLF, CBH, and CLG ETFs

You can set up a synthetic dividend reinvestment plan, however, for some iShares funds, including several of the laddered bond funds such as CBO, CLF, CLG and CBH. This is a synthetic DRIP, so your dividend will be used to purchase as many whole units of the fund as possible, and any balance will be paid into your cash account. You cannot buy fractional units.

InvestorLine Offers DRIPs for 2 of the 10 Largest (by NAV*) iShares ETFs

CBO is iShares sixth largest Canadian ETF.

InvestorLine also offers a DRIP for CPD the iShares SP/TSX Canadian Preferred Share Index Fund. This is iShares ninth largest Canadian ETF.

The Grand Total
In total, at this time, InvestorLine does offer a DRIP for 49 iShares funds. UPDATE: February, 2014: This number is now too large to bother counting.

Recommendation
If iShares ETF investing forms the core of your portfolio and you want to DRIP the dividends, you may want to call InvestorLine to confirm which ETFs it DRIPs before you transfer or open an account. The list of ETFs which qualify for a DRIP changes from time to time. It’s best to check directly with the source.

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If I Use an InvestorLine DRIP Will I Get the Discounted Price for Reinvesting in Shares?

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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.

Written: 2014
Reviewed: 2023

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 with 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.

Further Information

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