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Top Low-Cost Canadian DRIP Stocks Ranked by Yield, Dividend Growth and Discounts





DRIPs are already known as low-cost investment vehicles: the best ones have no fees for optional stock purchases or reinvestment of dividends.  But what if you could get even more “bank” for your buck by focusing on the best of the best?

I’ve been a do-it-yourself DRIP investor for almost a decade.  I started as an undergrad and over the years have refined my DRIP investment systems and strategies.  If I were starting now, I would begin my research with the following ranking of Canadian DRIP programs.  For information on enrolling in a DRIP, see my step-by-step guide on commission-free investing.

I have given the most weight to discounts, followed by history of dividend growth, the size of the minimum amount optional cash purchase and finally yield.  Why these criteria?  First, getting a discount to purchase stock that already costs you nothing in commissions is just like getting free money, and since it’s reinvested, all the better.  Second, Since most DRIP’ers are long-term buy-and-hold investors, dividend growth is going to be one of the surest factors in the success of your investment.  Finally, yield is informative regarding today’s purchase of the stock, but is also the least reliable indicator since it is merely an effect of the stock’s current price and in itself may not signify anything long-term.

I have also specifically chosen to limit the list to DRIPs that have no, or very low, minimum amounts for optional stock purchases.  That means this list does not include any DRIPs that require $250 or more for a minimum stock purchase.  This is my own judgment call, since most regular DRIP investors have been known to invest smaller amounts more regularly through dollar-cost-averaging rather than large lump-sums.

Top 12 100% No Fee, No- (Or Low) Minimum OCP Canadian DRIPs

With Discounts

  1. Bank of Montreal (TSX: BMO) – up to a 5% discount on reinvested dividends; excellent, regular dividend growth. No minimum amount for optional cash purchases.
  2. Enbridge (TSX: ENB) – 2% discount on reinvested dividends, excellent dividend growth with yearly increases; NO MINIMUM.
  3. TransCanada (TSX: TRP) – 3% discount; consistently and reliably raise their dividend yearly; $50 minimum.
  4. CIBC (TSX: CM) – 3% discount; usually increases dividend twice a year, except throughout this last financial crisis; $100 minimum.
  5. Bank of Nova Scotia (TSX: BNS) – 2% discount, excellent dividend growth, which has seen twice yearly increases for the last three years; $100 MIN.

No Discounts

  1. TransAlta (TSX: TA) – TransAlta used to maintain the same dividend for years with no increase, but that appears to be changing, with an increase in 2008 and again in 2009, surprisingly, despite the credit crisis.  No minimum.
  2. Emera (TSX: EMA) – This electricity generation company consistently raises its dividend and there are modest growth prospects for the company, as well. $25 minimum.
  3. BCE (TSX: BCE) – These days analysts seem to buy BCE not for its growth prospects, but just for the yield. The stock shows some growth of dividends; these were not increased yearly between 2001-2006, but have been since then (save the period during which the Ontario Teacher’s Pension Plan was in the process of taking them over).  The dividend was last increased August, 2009. No minimum.
  4. Telus (TSX: T) – Between 2002 and 2005, Telus did not increase its dividend, but since 2006 there has been yearly dividend growth. $100 MIN.
  5. Suncor (TSX: SU) – Suncor is another top-notch Canadian company, but the stock has a low yield.  Because of its potentially greater growth prospects right now, I’d rank this one slightly above IMO, despite the higher minimum.  Dividends are increased somewhat regularly, with the most recent increase being September 2009. $100 minimum.
  6. Imperial Oil (TSX: IMO) – Imperial Oil is an excellently run company with great assets, but like Suncor, has a low yield.  Dividends have been raised somewhat consistently over the years, with it looking a bit better in the last five or so. $50 minimum.
  7. Bell Aliant (TSX: BA.UN) – Similar to BCE, little growth is expected in this stock itself, but investors like it for the distribution.  After 2011, it will convert back to a corporation and might see a small dividend cut.  There has been modest distribution growth, but no more is expected before 2011.  $25 MIN.

This list is by no means a complete list of all Canadian DRIPs, but these are undoubtedly some of both the biggest and most popular plans.  These stocks are frequently discussed in programs on BNN and also comprise some of Canada’s largest companies and employers.  You can invest in U.S. DRIPs, too, but the process is a bit more complicated and requires you to have an American bank account or a chequing account drawn on U.S. dollars in Canada.

If a company you like isn’t on the list, it is probably because it does not have a DRIP (in the full sense of both free direct purchase and dividend reinvestment), or, as with many of the income trusts, the minimum monthly or quarterly required amount for purchase is high, such as $500 or even $1000 in some cases.  I have tried to make the list as up to date as possible, but if you notice an error, please let me know.

Best DRIPs For Your Money

The best bets for DRIPs, assuming you like the companies as long-term investments, are the top 5 that also have discounts on the reinvestment of their dividends.  Why pass up “free money”?  That being said, companies change their discount offerings based on the market, so it is not uncommon to see reductions, increases, or even suspensions of the discount.

If you’re new to DRIPs, start your research with this list.  You might also want to check out the guide I wrote on how to get started in commission-free, fee-free investing for more specifics on how to enroll.

This article is a guest post from Clare, a self-taught DIY investor and founder of MoneyEnergy, a Canadian personal finance and investing blog.  Clare also writes for Personal Dividends.  You can subscribe to her RSS feed here and follow her on Twitter.





53 Comments, Comment or Ping

  1. 1. tim

    Anyone have a similar list with US stocks? Also interested to see a list of income trusts that are considered to have safe distributions.

  2. Thanks for the post Clare, great to see a listing of the best discounts in the industry.

  3. Telus has announced last week a 3% discount on shares purchased using reinvested dividends.

  4. 4. Gerry

    A nice post. One of your linked articles mentioned having to take the stocks in certificate form. Is this still, generally, the case? I invest through TD Waterhouse and they offer a DRIP programme for securities that remain inside their accounts. I haven’t used it yet, there may be restrictions? Perhaps other institutions do the same?

  5. 5. Jarrett

    “I invest through TD Waterhouse and they offer a DRIP programme”

    That is a synthetic drip, and will only drip whole shares. The traditional drip will drip partial shares

  6. 6. gscoc

    I invest with TD Waterhouse and actually recently bought BMO stock but don’t remember seeing the option to enroll in a DRIP (like I do when I buy TD E funds) – to take advantage of the DRIP is the stock supposed to be bought differently?

  7. gscoc, with most discount brokerages, you need to phone them to DRIP a div stock. Note though as Jarrett mentioned, synthetic DRIP will only work if you get enough in quarterly dividends to purchase 1 stock, otherwise the div is distributed as cash.

  8. 8. Luc Richard

    Is it possible to open have a DRIP inside a TSFA brokeage account?

  9. 9. Luc Richard

    Is it possible to open have a DRIP inside a TFSA brokeage account?

  10. @Tim – great idea, that would be a good list to have. I compiled a list of the companies still operating as income trusts.

    @Luc – yes, with certain companies. You can “pseudo-DRIP” / “synthetic-DRIP” them inside an account like that by asking your brokerage to reinvest the dividends. But I believe they will not all do fractional amounts, only whole shares. Someone correct me?

  11. @Gerry – the certificate is still needed if 1) you are enrolling in a DRIP to hold it outside of any brokerage (such that you, not the brokerage, will hold all future shares) and 2) if you do not get a share “gifted” to you by someone else. If you know someone who has shares in the company you want, they could transfer over a share to you and it could save you on the initial commission fees, but you’d still need that certificate to enrol.

  12. 12. TheRat

    The only issues I have with DRIPS:
    1/ You may often be buying shares at unattractive prices
    2/ You may be losing out on dividend income that can be used for day-to-day living expenses or investments elsewhere.

    Nice thread! I had no idea that BMO offers discounts of up to 5%.

  13. 13. Kev

    Fortis would be another one worth mentioning.

  14. 14. Jarrett

    “s it possible to open have a DRIP inside a TFSA brokeage account?”

    Yes, it is. But again, it is a synthetic drip, and will only buy full shares. Any money left over after full shares are purchased, will go to the “cash” portion of your brokerage account.

    Jarrett

  15. 15. Jarrett

    Also note that some brokerage account also offer the drip discount that the individual company may offer. For example, TD Waterhouse will hounour the discount on EIF dividend re-investments!

    Check with your broker.

  16. 16. Mr. Cheap

    Clare: Another great post on Canadian DRIPs!

  17. 17. Ray

    You’ll want to keep all your investments inside TD Waterhouse and not DRIP directly because then you’ll hit the total assets $100k mark sooner and automatically get activetrader status and $9.99 trades (instead of $30). This will save you even more money than the compounding on the partial shares you lose through their synthetic drip. I just became activetrade last month, w00t.

  18. 18. Gerry

    Ok, so it sounds like Waterhouse will DRIP full shares and will even honor the discounts. Excellent. Ray, good point on the commission fees, thankfully I’ve been at the $9.99 level for over a year. I’ll call them next week and see what they say about my BMO shares.

  19. @Ray – congrats to getting up past 100k. Yes, that is a great level to be at and will save lots of commission fees. Still, you have to pay them, though!:)

    One good strategy is to keep all your “real” DRIPs open and buy shares through the DRIP. Then you can pull them out in certificate form as needed and deposit back into brokerage in order to collect divs as cash. This way you avoid all commissions, too.

    @Mr.Cheap – thanks!:)

  20. 20. Singh

    RBC gives 3% discount and I think it should be in the list.

    http://www.rbc.com/investorrelations/ir_dividends.html

  21. 22. Tim

    Does anyone have a list of the US DRIP stocks? I think someone on the forum started a thread called the Ultimate DRIP-folio or something like that.

    Would be interesting to see how the dividend payers stack up against the value plays over the next couple qtr’s…

  22. 23. Mark in Nepean

    Hi All,

    Yes, you can DRIP with your brokerage account – but its a synthetic DRIP (only full shares are purchased).

    A much better plan is to buy your stocks and DRIP them via the transfer agent.
    This way, all dividends go to buy more stock, even partial shares of the stock.

    Again, free money and no commissions. Win-win.

    Good post, nice to see something on DRIPS!

    Cheers,
    Mark in Nepean

  23. 24. rajarajan

    Mark in Napean: How to buy via transfer agent.

    Why do we need certificate, i am having my ESPP and my DRIP stays within computershare, do i have to do anything like ask for certificate or convert DRIP into common share?

    Thank You!

  24. 26. MikeG

    One thing to remember is that with a drip you do not get to time your investments. If you’re like buffet and wait for blood in the streets, then you may prefer not to DRIP.

    ie, If a stock is consistently going up for 2 years, you’re buying progressively higher up the curve. Some investors may prefer to keep the dividends in cash and purchase more stock when they hit low prices.

    Depends if you believe its possible to time the market or not.

  25. @Singh – Nice there’s a discount at RBC, but it doesn’t have a “full DRIP” – it can only be synthetically dripped through your broker. A real DRIP, i.e., a direct investment plan, will allow you to buy directly through the transfer agent and invest all the partial shares, too.

    @DabCan – thanks for the heads up on Emera! Great that it now has a discount. Will probably be one of my new favourites.

    As for timing the market, yes, that is a downside of traditional DRIPs. To get around it, pick less volatile companies and you won’t have to worry so much about ups and downs. This past year is a bad, rare deviation from historical VIX norms, however.

  26. @rajarajan – if your DRIP is already within Computershare, it sounds like you’ve already been through the certificate stage, so you don’t need another one.

    Typically you use the certificate to enrol in a DRIP. You buy the first share through your broker as usual, but then you ask for it to be certificated. They mail it to you, and this is how you enrol in the DRIP.

    Check out my guide (linked in the post) – I’ve tried to lay out all these initial steps.

  27. 29. Dave

    Great information! DRIPs have really accelerated my portfolio growth especially though this last year and to get a discount on anything adds to the glee.

    Do you know if there are any high yield ETF discount DRIP programs?

  28. Thanks for the list. Didn’t really understand what DRIP stocks were but now it’s a little more clear.

  29. 31. Matilda Greene

    thanks for the great article

  30. @Dave – I think you mean a DRIP program with discounts which is composed of a high-yield ETF? Good question!

    The traditional DRIP format I highlighted in the article wouldn’t apply to ETFs as such, by design. But you might still be able to put together your own “DIY DRIP” with an ETF.

    One of the first options I found for cheap ETF investing is through Canadian ShareOwner. Unless you have more than 100k in investment assets (I don’t yet), ShareOwner will be one of the cheapest options. But also check out TradeFreedom and the other $9.99/trade brokers.

    As a rule, I have not really seen many “high-yield” ETFs. Even when the underlying assets are high-yield, like REITs sometimes, I find the ETFs don’t really pass on the full yield.

    But if you find one you like, you can just collect the dividends/distributions and reinvest them yourself. But then you’d have the $9.99 commission fee each time.

    Someone correct me if there’s a *no-commission-fee* “ETF DRIP” out there that I don’t know about!

  31. I agree with @MoneyEnergy. I have one of my accounts with Canadian ShareOwner and like the service. It’s the easiest way to have DRIP-like investing without having to deal directly with individual issuers (which I used to do.)

  32. 34. bob

    Canadian shareowner ..how safe is it…i believe it depends on its founder..
    what happens after the founder..would there be continuity..

  33. @bob: Canadian ShareOwner Investments is a current member of the Canadian Investor Protection Fund. See http://www.cipf.ca/c_find_active.asp … as such, you ought to be protected in the case of dealer insolvency. Furthermore, I believe customer assets are held by a trustee, The Canada Trust Company.

  34. 36. Sauce

    Question on the dividend portion that is being reinvested – if it being automatically reinvested do you pay tax on the dividend itself?

  35. @Sauce – yes, you pay tax on all dividends, reinvested or not. You’ll receive a form at the end of the year for it (unless you’re doing a synthetic DRIP in your brokerage account within an RRSP, of course).

  36. 38. Ray

    Need clarification: For individual investors, you cannot participate in a “real DRIP” (i.e. obtaining the physical stock certificate) within a RRSP plan. Is that correct?

    Before I call TDW, could anyone please comment on whether discount brokages would honour the DRIP discount (e.g. 3% for BMO) for each full share?

    Thanks.

  37. 39. Ray

    Need clarification: for individual investors, you cannot participate in a “real DRIP” (i.e. obtaining the physical stock certificate) within a RRSP plan. Is that correct?

    Also, before I call TDW, could anyone please comment on whether these disc. brokages would honour the DRIP discount (e.g. 3% for BMO) for each full share?

    Thanks.

  38. This was a great article. Very well laid out and good backup for my purchases of BMO!

  39. 41. Mark in Nepean

    rajarajan:

    Visit the following site, it will get you started (free site, seeking to help those who no longer want to pay commissions to buy stocks; like me)

    http://cdndrips.googlepages.com/home

    Happy reading and learning.

  40. 42. Zulli

    @ Steve, Yeah I agree. Very informative! and the visitors and the site’s owner share questions and answers which is good.

  41. 43. Ameila

    There is a high yield DRIP option that is free. My Tax Free Savings Account is in FIE from Claymore an ETF that is made up of Canadian Financials. The yield when I bought it is 9% (currently 7.1%) and I have it set up so each month it buys more shares and fractionally at that for no cost. The compounding effect is tremendous and it has returned over 20% this year. You can set up SIPs and DRIPS for all of Claymore’s ETFs now.

  42. 44. rico,rph

    How do you guys feel about paying $300 to certificate with Questrade? I called them today and this is what they charge for each Canadian position. Seems pretty pricey. What do the other brokerages charge?

  43. @rico,rph – Don’t buy your certificates through Questrade, it is ridiculously pricey. If you go through the Big 5 discount brokers, it’s only about $50-52 at each of them.

    @Ray – I’m not positive about the RRSP question, since I haven’t tried putting them in my RRSP. As for TD honoring the discount, I believe they would on the reinvested portions (someone correct me if I’m wrong) – again, I’m not at the point yet where I’m pseudo-dripping certain stocks at the big brokers.

  44. 46. Jon D.

    Well, it’s definitely an interesting idea sorting or ranking Canadian DRIP&SPP Plans based on discount and OCP minimum, but honestly, considering there are only 16 corporations (plus 2 fringe corps EIF, OLY) it’s like trying to prioritize your children.

    I think the focus should be if an investor chooses DRIPing, to ensure they are covering the major sectors for an attempt at diversification.

  45. 47. Paul

    I can’t believe you didn’t mention Fortis, TSX: FTS. It has a 35 year record of increasing its dividend every year, the longest record for any company in Canadian history. Check out this chart http://www.fortis.ca/InvestorCentre/FortisStock/DividendHistory.aspx

    I would pick Fortis over Emera any day!

  46. 48. cannon_fodder

    This is a good article which has lead me to think of a few questions:

    1. What happens if I own the same stock in multiple accounts? If I get a certificate does that allow me to DRIP only in the account from which that certificate orginated?
    2. Is there a difference between stocks which issue dividends and those which issue distributions (e.g. Income trusts) in any significant way which would impact the DRIP process?
    3. Has someone published a hypothetical analysis of the advantage of a “real” DRIP vs. a synthetic DRIP over a long period?
    4. Once you possess the certificates, should they be placed in a safety deposit box, or is there a way to prove ownership and be made whole should they be destroyed in a house fire?

  47. 49. Ken

    Check out http://cdndrips.blogspot.com/ for another list of Canadian DRIPs

  48. 50. Startupgirl

    I purchase some stocks through Questrade. I called Quest to get the stocks certificated and was told the cost is $300 to get this done. Judging from this price it will end up costing me more for the certificates ($3600 CND) which is just a little less than what I paid for the stocks. Is this price too expensive? And why does the stock need to be certificated and is certification needed for DRIPS. This is my first experience buying stocks on my own.

  49. 51. Jay

    Txs for the article. I have a synthetic DRIP in place with TDW. One thing I’m not clear about. Is TDW giving me the discount on new shares offered by companies like ENB and BMO? Sometimes I can’t figure out how they establish the reinvestment price…

  50. 52. James

    Hi everyone,

    I have a few questions regarding the optional purchase plan for BNS.TO (Bank of Nova Scotia).

    1. I know there is a minimum of $100 for each remittance, my question is would they allow fractionals share purchase? or it can only purchase a whole share. (I’m talking about the optional purchase plan NOT DRIP)

    2. For the optional purchase plan, is there a certain date or frequency on how often the shares will be purchased?? or is it accoriding to my cheque date that I will write to them and they would purchase the share on that particular date?

    Thank you for all your help

  51. 53. Mark

    I wonder if you’d be able to update this article with current Canadian stocks that offers a DRIP with discounts. Seems a lot has changed since the post was first… posted.

    Thanks!

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