DRIP also known as dividend reinvestment plan will be our discussion this evening as I want to switch gears a little and talk about investing now. As I feel the ultimate path to building wealth is a combination of investing and good spending habits. You may have read in my home and about me pages on the site about my struggles with getting started with investing.
This was due mainly to the notion I needed huge amounts of capital to get started as well as struggles between whether to save or spend. But seeing as how I want to take a breather about posting about debt/spending. Let’s stick to the DRIP. If one of your retirement goals is to live near the ocean or a body of water or even live part-time next to one then “dripping” can definitely be an effective tool to help get you there.
In its simplest form DRIP or dripping is taking the dividends paid to you by a company you own stock in and reinvesting or buying back into the same company with the dividends. Sounds great right? Well it is it really truly is for if no other reason but for the reason of compounding. Where it gets even better and more exciting is there are a few companies that will offer a discount on the reinvested amounts so basically buy back stock at anywhere from 1-5% discount on average market price. This is on top of the fact that there are no brokerage or commission fees associated with this transaction either.
Another awesome part of this is the fact you get to stay all in as far as your money invested your not having to stockpile up several dividend payouts to make it worthwhile to buy more stock. Most banks and financial institutions will allow you to do a synthetic drip.
What is the difference between synthetic DRIP and regular DRIP you ask? Synthetic DRIP will only buy up more whole shares with your payout with remainder going back into the cash portion of your account. Regular DRIP will buy up even fractional shares so every red cent gets invested back into shares. The tricky part with regular DRIP is that it has to be the transfer agent of the company that you re holding that does this. Hence why this option is not available at banks and financial institutions.
I want to stop it here for now on DRIPS but will leave you below with some links to get some more knowledge on them and also you can see what kinds of companies do participate in DRIP plans. I will then discuss the links and my experiences with them in our next post. But would like you too think about how neat it would be to watch your dividends from companies to basically auto invest itself and buy more shares so the next payout was even more.
Good night from GFW 🙂
Computershare <—-transfer agent
AST Trust Company <—-transfer agent
Canadian DRIP List <—-great resource for seeing Canadian companies that participate in DRIP’s
DRIP Investing Org <—-awesome community of like minded people and very friendly