Tag Archives: rules

When Can I Spend a Dividend or Distribution Payable into my BMO InvestorLine Account?

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Recently, I checked when a dividend paid to a shareholder is actually credited to a BMO InvestorLine account. I discovered it is reported in the transaction history and in the cash balance for the account the day after it is payable but the transaction was back dated to the correct day. That left me wondering when I could spend a dividend or distribution: on the day it should have been paid into my InvestorLine account or the day after.

I Asked InvestorLine Using the Secure MyLink Email Function

I like getting answers to my investing questions in writing whenever possible. It gives me more time to reflect on what is said and to decipher the meaning. It also gives me a paper trail, or at least an electronic trail, in case things don’t happen the way I was told they should.

So I wrote a note using MyLink to ask, among other things, “If I tried to buy stock or a GIC on July 31 using the dividend I should have been paid on July 31, would the transaction go through properly?”

BMO InvestorLine Says the Dividend or Distribution Can be Spent on the Day It’s Earned

A bit to my surprise, the reply from the Client Correspondence Specialist said if “…you wish to trade using the proceeds, and you may certainly do so online. Kindly ensure to accept the warning message that may prompt you about insufficient funds for the trade.”

My understanding based on this email is that I can spend the dividend on the day it was payable, in this example on July 31, provided I accepted any warning messages from the system cautioning me that I was short by the amount of the dividend on the amount I required to complete the transaction.

A Cautious Investor May Prefer to Wait for the Dividend or Distribution to be Posted

It is usually clear what amount you should be receiving in a dividend or distribution payment. The source usually issues a press release stating what the amount will be per share.

That said, a very cautious investor might prefer to wait one more business day to be sure the payment arrives as planned into their InvestorLine account before re-investing the money.

If, however, there is an investment opportunity available immediately that may be gone by the following day, it’s encouraging to know InvestorLine will permit the purchase to proceed based on acceptance of the warning message.

Why Does It Take an Extra Day for the Dividend or Distribution to Appear in an InvestorLine Account?

I did also ask why it takes an additional day for the cash to show up in an InvestorLine account and for the Transaction History to be updated (and back dated.) The answer is a simple computer system requirement. According to the MyLink Client Correspondence Specialist, “it takes an overnight update to reflect the change in the account online.”

In other words, the account cash balance is not working in real time. There are other examples of this. For example, if you place an order to buy a GIC, your InvestorLine cash account balance does not debit the purchase immediately.

My Conclusion
I’m somewhat reassured to discover that InvestorLine just has a cumbersome computer system and not that it is deliberately withholding access to my distributions and dividends for a day for their own purposes. Sometime, I would like to test this process and see what warning message one receives if purchasing an investment using a distribution on the same day it is paid. Right now, however, I’m not in a buying mood.

Related Reading

 

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Have you ever re-invested your dividend or distribution on the day it was earned? Did it proceed smoothly? Please share your experiences with a comment.

When Will I Get My Dividends in my InvestorLine and Investor’s Edge Brokerage Accounts?

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Before I opened a self-directed brokerage account at BMO InvestorLine I owned some shares that I kept in a safe deposit box at the bank. Every quarter, about a week before it was payable, a dividend cheque would arrive from the company’s agent. On the payable date, I would deposit the cheque in my account and could spend my capitalistic largesse immediately. So I was very curious when I first bought stock in my InvestorLine and Investor’s Edge accounts to see when the dividends would appear.

BMO InvestorLine Is Not Too Swift

I was a bit disappointed to discover, and verify over many payments, that BMO InvestorLine takes one full day after receiving a dividend on my behalf to post it to my brokerage account.

For example, Cineplex, which pays a monthly dividend which is great for income seekers, paid its June dividend on July 31 this month. If I had received a paper cheque in the mail, I could have cashed it and spent the money going to a movie that night. With InvestorLine, however, the money doesn’t appear in my account ready to spend till the morning of August 1.

Frankly given this is all done electronically, I’m a bit surprised by the delay. Since the paper cheques are mailed and delivered to my home several days before the payable date, one would think the electronic file would be available ahead of time too.

Now let’s look at Investor’s Edge.

CIBC Investor’s *Edge* Isn’t a Faster Dividend Payment

CIBC may be trying to give investor’s an edge but if they are it’s not by paying them their dividends on the day they are earned. Just like BMO, CIBC is taking one full day after receiving a dividend on my behalf to show it in the transaction history and cash balance of my brokerage account.

Is There a Benefit to Brokerages In This Delay?

Having a nasty suspicious mind, I wonder whether there is any benefit to the brokerages in this delay. Where is the money during the missing one day? Still in the issuing company’s bank account? Or sitting in an undisbursed slush pile in my brokerage? I think I should send a secure email by MyLink to BMO InvestorLine and ask them.

Checking Your Transaction History for Your Dividends

I’ve mentioned before that BMO InvestorLine back dates dividend payments to when they should have been made in the Transaction History.

CIBC Investor’s Edge does the same thing in its Transaction History.

Why Does It Matter If the Dividend Shows Up a Day Late?

For ultra conservative slow poke investors like me, it doesn’t particularly matter if the dividend payment is made a day late. But I can see how it might matter to others:

  • if there is a great buy available on the day the dividend money should have been available, it must hurt to watch it slide out of reach while waiting one more day: even GIC rates flutter day by day
  • if someone is using the dividend income to pay bills, even a day’s delay might cause problems depending on how the dates line up between bills and dividend payments

Related Reading

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When does your brokerage pay your dividends? Remember you can’t always tell by the Transaction History. You may have to actually check your cash balance on the day the money should have appeared. Please share your experiences with a comment.