Q&A With Gordon Pape: Why Isn’t Anyone Talking About DRIP Benefits?

DRIP Benefits

Dividend reinvestment plans can be an excellent way to build your share position in a company. Photo: erhui1979/Getty Images

In this Q&A, financial expert Gordon Pape looks at the benefits of dividend reinvestment plans (DRIP), and gives some of his top picks.


QWhy 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. 

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