In this Q&A, financial expert Gordon Pape looks at the benefits of dividend reinvestment plans (DRIP), and gives some of his top picks.
Q – Why do articles comparing individual stock ownership benefits compared to mutual funds/ETF ownership not mention DRIP benefits of reinvesting dividends?
I consider DRIP benefits to be the opposite of MERs (management expense ratios) paid on mutual funds or ETFs – which I understand do not pass on DRIP benefits to unit holders.
I love using reinvested dividends to purchase shares at a 3 to 5 per cent discount. I am paid to be a shareholder instead of paying to own a fund.
These DRIP benefits add up over the years as they also compound.
Am I looking at DRIP benefits properly? – Kim C.
A – Yes you are. Dividend reinvestment plans are an excellent way to build your share position in a company. Not all companies offer them, however. You can find a list of those that do here.
Many of these give shareholders offer a price discount on DRIP purchases, which can be as high as five per cent (e.g., Agnico Eagle, Calfrac, Crescent Point Energy).
Some ETFs and closed-end funds also offer DRIP programs. Ask your broker for a list. – G.P.
Do you have a money question you’d like to ask Gordon? Send it along and then check out our Q&A section regularly to see if it was chosen for a response. Send questions to gpape@rogers.com and write Zoomer Question on the subject line. Sorry, we cannot send personal answers.
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