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One way to use dividends from stocks and ETFs is to reinvest them by purchasing more of the same stock or fund. If this is done automatically it is called a Dividend Re-investment Plan or DRIP. There are pros and cons to setting up a DRIP for your investments in a CIBC Investor’s Edge self directed account. Investor’s Edge calls their DRIP program the ShareBuilder Plan.

Pros of a Synthetic DRIP with the CIBC Investor’s Edge ShareBuilder Plan

No Fee

There is no fee to join or use the ShareBuilder Plan to reinvest dividends earned by the investments in your CIBC Investor’s Edge account.

No Commission

One of the key benefits of a DRIP is that you do not pay any fee or commission to purchase new shares of a stock or ETF that you already own. This saves you the commission, which is often $6.95 or higher for an Investor’s Edge account. This can allow an investor who is starting with a small number of shares to gradually increase their holdings at no cost.

Prompt Reinvestment Puts Your Money Back to Work Fast

For small share purchases the commission can be a deterrent to reinvesting your dividends promptly. The cost-free DRIP program encourages you to get your earnings back to work immediately. This can be an advantage for investors whose dividend payments are so small that paying a commission to buy new stock to reinvest those same dividends would not be practical. For example, if an investor is only receiving $36 from a dividend payment, paying $9.95 to re-invest it might not be reasonable.

Share Price Discounts

Some companies also encourage investors to DRIP their dividends by offering shares at a discount to their trading price. For example, at the time this was written, you could buy Enbridge shares (ENB) at a 2% discount off their trading price. If you use the ShareBuilder Plan you are also eligible to receive these discounts. (Specifically, the Enbridge document states shares purchased “with reinvested dividends will be 98% of the weighted average of the trading prices for Common Shares on The Toronto Stock Exchange on the five trading days preceding a dividend payment date.” This discount is subject to change at any time by Enbridge.)

You Choose to Enroll All or Only Select Stocks in the DRIP

With the ShareBuilder Plan you can choose to enroll at the account level. If you do, all stocks you hold that are eligible for a DRIP will be enrolled in the CIBC synthetic DRIP. OR you can enroll individual securities in the ShareBuilder Plan. That means if you want, you can pick and choose which stocks will DRIP and which stocks will receive cash dividends. (This flexibility is valuable if you need cash flow, or if you do not want to increase your holding in certain specific companies but you do in others.)

You Can DRIP US Securities with CIBC Investor’s Edge ShareBuilder Plan

Unlike BMO InvestorLine, CIBC Investor’s Edge allows you to DRIP US securities. For more information, please see Can I DRIP US Stocks from a CIBC Investor’s Edge Self Directed Account?

Dollar Cost Averaging

You don’t hear as much about this investment philosophy anymore, but it might be of interest. The price of a stock may vary both upwards and downwards during the course of a year. If the stock pays dividends quarterly or monthly and those dividends are reinvested through a DRIP, then the investor would be paying both high and low prices. When the price is low, the investor would get more shares for the same amount of money than when the price is high. The idea is that dollar cost averaging reduces the risk that you would buy all your stock at the same moment that the stock is at an all –time high price.

Cons of a Synthetic DRIP with the CIBC Investor’s Edge ShareBuilder Plan

No Fractional Shares

The ShareBuilder Plan offered by Investor’s Edge, like that of most self directed brokerages, is a synthetic DRIP. You can use your dividend payment to purchase new shares but only to purchase whole shares. You cannot buy a fraction of a share within a synthetic DRIP. (If you enroll directly in a DRIP with the transfer agent for a stock as the registered holder of the shares you can actually buy fractional shares.)

So if your dividend pays $176 and the price of a share in the company is $81, you can buy two shares. The $14 balance of your dividend payment will be deposited into your Investor’s Edge account as cash.

CIBC confirmed this in their email response to me stating, “Excess amounts will not be accumulated or carried forward for the next month’s dividend.” So you can’t just hold the $14 until the next dividend date and reinvest it then for free. You will just receive the $14 immediately as cash.

This means if you have a very small holding of stock and it pays a low dividend, you may not be eligible to purchase ANY shares through a DRIP. You might want to do the math to check before enrolling in a DRIP. (Divide the dollar value of a single (not annual) expected dividend payment by the price of a single share to see approximately how many shares you can purchase.)

Only Certain Holdings are Eligible for the ShareBuilder Plan DRIP

CIBC advised me by email that ”Eligible securities include all dividend-paying securities listed on the TSX 300 and S&P 500….[Please] check with us regarding individual securities.”

That means you should be able to DRIP many popular companies including:
BMO, BNS, CM (CIBC), RY, TD
ENB, SU, TRP
HR.UN, REI.UN
BCE. RCI.B, T

Not all companies offer a DRIP through the ShareBuilder Plan. (In fact, not all companies offer a DRIP at all.)

You must have a certain minimum number of shares before enrolling in a DRIP if the company requires this.

How to Enroll for DRIP Using the CIBC Investor’s Edge ShareBuilder Plan

You may enroll in the ShareBuilder plan at the account level. If you do, all eligible securities will be DRIPped.

You may also choose to enroll only select securities in the DRIP ShareBuilder Plan.
CIBC advised in their email to me that, “To enroll in the ShareBuilder Plan, please call our Contact Centre…. at 1-800-567-3343 (Monday to Friday, 8 am to 8 pm ET).”

Related Articles

Can I DRIP US Stocks from a CIBC Investor’s Edge Self Directed Account?
Details about the Enbridge DRIP

Join In
Have you set up a DRIP for any of your Investor’s Edge stocks? Please share your experiences with a comment.

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.)