Canadian TSX Stocks with Dividend ReIinvestment Plans and SPPlans

Updated March 2009 info for:
Bank of Montreal (TSX:BMO) – 2% discount added
Bank of Nova Scotia (TSX:BNS) – 2% discount added
Fortis Inc. (TSX:FTS) – maximum increased to $30,000; 2% discount added
NAL Oil & Gas Trust (TSX:NAE.UN) changed (DRIP suspended; SPP active)
Thomson Corporation – updated name and stock symbol to Thomson Reuters Corporation (TSX:TRI)
Toronto-Dominion Bank (TSX:TD) – 1% discount added
TransCanada Corporation (TSX:TRP) - discount increased to 3% in December


Updated info From: http://cdndrips.blogspot.com/

New plans added:
Canadian Oil Sands Trust (TSX:COS.UN) – DRIP reinstated
Corus Entertainment (TSX:CJR.B)
EnCana Corporation (TSX:ECA)
First National Financial LP (TSX:FN.UN)

What is a dividend?

A dividend is a payment made by a large company out of its profits. It is paid to you as a shareholder to reward you for being part of the company. When you have invested money (even if only 1 share) in a company, you will be paid a portion of the company's profits - as long as that company pays dividends.

As dividend investors, you and I use these dividends to buy more company shares to acquire more dividends. Once we accumulate a large number of shares, it is those dividends that we will spend. Our goal is to never touch our principle (total shares) so that we can always collect dividends (usually quarterly) for as long as we need them.

For example: Bank of Montreal shares (which range in price from a yearly low of $28.89 to a high of $58.98 per share) pay their investors $.70 per share quarterly. If you own 10 shares of BMO, you will be paid $7.00 every quarter, so that is $28.00 per year in dividends. Imagine if you owned 1000 shares of BMO. Or even 10,000 shares. This is what we are trying to accomplish. This will be money that Canada Revenue Agency treats the best as far as income taxation is concerned. Your goal is to achieve as much income from dividends as possible. This will supplement your income as you grow older.

According to Wikipedia:

"Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.^[1] When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. Many corporations retain a portion of their earnings and pay the remainder as a dividend.

For a joint stock company, a dividend is allocated as a fixed amount per share. Therefore, a shareholder receives a dividend in proportion to their shareholding. For the joint stock company, paying dividends is not an expense; rather, it is the division of an asset among shareholders. Public companies usually pay dividends on a fixed schedule, but may declare a dividend at any time, sometimes called a special dividend to distinguish it from a regular one.

Dividends are usually settled on a cash basis, as a payment from the company to the shareholder. They can take other forms, such as store credits (common among retail consumers' cooperatives) and shares in the company (either newly-created shares or existing shares bought in the market.) Further, many public companies offer dividend reinvestment plans, which automatically use the cash dividend to purchase additional shares for the shareholder. "

Why Dividends are Important. 

The return from dividends over the long term has been a significant contributor to the total return to one's portfolio.

1. Portfolios consisting of higher dividend yielding securities produce better returns overall in the long term.
2. Stocks with high and sustainable dividends are competitive with high quality bonds  and may be more resistant to decline in price. The reinvestment of dividends during stock market declines lessens the time necessary to recoup portfolio losses when they occur. Market cycles occur regularly.
3. The ability to pay cash dividends is a positive factor in assessing the health of a company. Particularly important in this day of fraudulent earnings and manipulation.
4. Tax policy is more favorable toward dividend income at this time than income from other sources.
5. Dividends are important towards growing income - despite declines in overall portfolio value, dividends from blue chip stocks continue to be paid unless catastrophe hits.

Why do people buy bonds or apartment buildings? For the income. With our strategy, we do not need to 'sell our building". We do not depend on the value of the markets like mutual fund holders, the building provides the income through dividends.

Adapted from commentary by Tweedy, Browne Fund Inc.

Questions and Answers 

What is a DRIP?

DRIP is short for Dividend ReInvestment Program. It is a plan that is put in place by the business allowing an investor to reinvest cash (dividends) from the company - back into the company without incurring any costs. Drips are created by companies to share their profits with shareholders. The company whose shares you own  either pays you dividends in cash (cheque) or buys shares in that specific company with the cash. The Dividend ReInvestment Plan holds the shares bought by your cash through ownership of shares. This is the company's profits reinvested in the company to buy more shares thus the owner (you) receiving more dividends. And so on.

For the companies, when shareholders reinvest their dividends, the drips provide them with a stream of income, allowing the companies to use this money to grow their business dealings. Along with this general investing program, there is a Share Purchase Plan that allows an investor to send in occasional lump sum payments to buy more shares in the company. This then provides the client with more dividends. Eventually, after several years of reinvesting the dividends, when shareholders have enough shares or they need the money, they will then instruct the company to pay the shareholder in cash instead of dividends. This gives the shareholder money which they can spend without using up their capital stock.

What is Blue Chip investing?

Blue chip investing means that investments are made in stocks that have the highest quality rating of all companies. Blue chips stocks are companies that are the most solid, safe and secure of any available to invest in. These are rated by the investment community as being almost risk free.  These companies have a long history of paying dividends - at least a period of 10 years. Some of the bank stocks have paid dividends since the 1800's. With that kind of history, there is a very good chance that they will continue to pay dividends for as long as we need them.

Why would I want to invest in shares in any company?

Investing in the stock market has proven to be one of the most sure ways to increase your personal wealth. Picking a blue chip company allows you to be part of that business so that you will share in profits as that company grows. Investing helps you to grow your personal net worth, giving you the option of having your money work for you, not you working for money. Financial freedom is what this is about.

How much money do you need to get started? 

You can invest with as little as $10, depending on the company plan (ie. BMO, BNS, ENB). If you buy a single share from a current owner, you may be able to purchase a share for as little as the cost of the share plus a small gratuity of $10. Or you can buy 100 shares of a company by purchasing through a brokerage company for 100 times the price of the shares plus perhaps a $29 commission that the brokerage charges. 

Why would a person invest in a Blue Chip company?

Once you own a share of a blue chip company, you can then become a member of that company's dividend reinvestment plan. This allows you to purchase shares in that company by sending in a small amount of cash to that trustee who will then invest this money into a drip for you. There are no fees associated with this type of plan. All your after tax dollars go directly into the investment plan with no expenses to you. There are no commissions or investing fees to pay. All money goes directly into your investments.

This is done to build up your personal assets. You can always put your money in a savings account and earn interest, or you can actively work towards building yourself a solid portfolio which will give you financial freedom as you mature.

How can you benefit? 

The biggest benefit that I can see if that you start an investment program that will benefit you over the long term. Savings accounts do not keep up with inflation or even with the cost of living. When you invest in Blue Chips stocks, you have the best chance of all to become a person of substantial wealth. Certainly it takes time and effort and a bit of diligence on your part. You need to sacrifice some of the playthings of today for those of tomorrow - that is not spend all your cash or more than your income - but put some of it away. Sometimes a person's spending habits need to be looked at closely to see where some savings can be had. However, if you even invest $100 every once in a while, you will be amazed at how soon it adds up and this will in turn spur you on to saving more. Besides, if you are given any monetary gifts, investing in this type of plan can bring great results later on. "Check out the rule of 72".

How do you start? 

You can  start the process by contacting me  at   This e-mail address is being protected from spambots. You need JavaScript enabled to view it  and I will walk you through the process or do the physical work for you. These are exciting times and nothing is as exciting as being able to create your own destiny.

To connect with me email me or fill out  the form under "Contact Information".