Dividend Reinvestment Plan Features
Note: This is a general discussion of DRIPs and their features. Plan terms vary. Plan documentation must be consulted to determine the specifics of each plan.
Fees to administer the plan are generally paid by the issuer offering the plan. You can build on your investment on a regular basis at no cost.
In situations where sharesholders pay fees, they are usually minimal, and a fraction of the cost of brokerage fees.
Optional cash payments (OCPs)
Some DRIPs offer a feature known as optional cash payments (OCPs), which enables plan participants to purchase additional shares of the company's stock by making voluntary cash contributions to the plan.
The frequency of optional cash purchases varies from plan to plan, but it is generally monthly or quarterly for plans offered by Canadian issuers. Plans may also have minimum and/or maximum permitted purchase amounts; per individual purchase or per year.
As with reinvested dividends, the shares are acquired with little or no commissions.
Canadian anti-money laundering laws require CST to obtain information from optional cash participants. If you intend to make optional cash payments, please send CST a completed Participant Declaration form if you have not already done so, for the plan in question.
Participating in a DRIP enables shareholders to purchase and hold fractional shares.
For example, if on a payable date you are entitled to a dividend payment of $12.50, which is reinvested in additional shares at a purchase price of $4/share, you would receive 3.125 shares. Over time, fractional share holdings accumulate into whole share holdings for the plan participant.
How shares are held
Shares purchased in the plan are held in electronic (book-based) form on your behalf by CST. The plan shares are registered in your name, and you have all of the rights and privileges of a registered shareholder.
Statements showing transactions and plan holdings are usually issued on a quarterly basis. If desired, you can request share certificates, but plans may have some restrictions (e.g. a limited number of free withdrawals per year).
Continue to the next page for more about the benefits of dividend reinvestment plans.