Pros and Cons of Using a DRIP for BMO InvestorLine Dividends

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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Do you DRIP even when it’s not raining? Please share your experiences with a comment.

Do I Have to Pay a Commission if My Order to Sell Stock or Buy Stock Doesn’t Get Filled?

When I was new to online investing in my self-directed brokerage account at BMO InvestorLine, one of my first “newbie” questions was: “If I put in an order to buy a stock at a certain price and no one sells it to me, do I still have to pay the fee?” I could see myself spending my entire investment account on fees for unfilled orders.

Written: 2012
Reviewed: 2023
Revised: 2023

So I asked BMO  by email how the fee works.

They reassured me that no, if the sale does not go through, I don’t have to pay the fee.

Phew.

Also, if I put in an order to sell a stock at a certain price, and no one wanted to buy it, I also would not have to pay a fee.

Partial Fills of Trades Can Result in Fees

There is one exception, though. If you put in a request to buy or sell a stock and they buy or sell part, but not all, of it then you will get charged a fee.

For example, say you want to buy 500 shares of BCE at $40. Someone may offer to sell 200 shares of BCE to you at that price. That will result in a “partial fill” of your order.

If no one else sells you the other 300 shares before the close of trade that day, you will get charged the full commission, which is $9.95 for my BMO InvestorLine account in 2023.

You get charged the $9.95 even though you still want 300 more shares. And if you put in another order the next day for the other 300 shares, if it fills you will be charged another $9.95!

I guess that’s why they call this “playing” in the market. You might have to pay a fee or two you don’t expect. Whether you have to or not is a game of chance.

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Have you ever got zinged with a fee you didn’t expect because of a partial fill? Or did they get you some other way? Please share your experiences with a comment.