# DRIP - TFSA help needed



## King Tut (May 3, 2009)

Just opened a TFSA account with Questrade, and would like to DRIP canadian stocks such as RBC, Manulife, and BCE.

I read the canadian premier on DRIPs & TFSA:

http://www.dripprimer.ca/tfsadrip

Still could not wrap my head around the instructions. Why not buy the stocks through my Questrade TFSA account and fill out the questrade DRIP form to have the brokerage (Synthetic) DRIP on my behalf 

The article is suggesting buying the stock outside the TFSA first, register it with the company, then transfer it in kind to the TFSA. What are the merits of this approach
The latter approach as I understand it triggers capital gains taxes when the stocks are moved to the TFSA account.

Any input would be much appreciated.


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## Argonaut (Dec 7, 2010)

You're correct in your thinking that a real DRIP can't be used within a TFSA. You would have to use the synthetic one. My only thing to say with a Questrade DRIP is good luck. 

I have sent about four hundred and seventy thousand messages to them instructing them to setup a DRIP in my TFSA. At first I got messages of assurance that the DRIP had been setup, or was going to be. Still I only received cash dividends instead of one or two whole shares. And finally, months later the last message I got was that the DRIP couldn't be setup because I had sent an emailed signed copy of the DRIP form and not one in the regular mail. And of course this was during the postal strike. This despite the fact that it was easy enough to apply for two accounts all online without any mail whatsoever.

I've finally given up and won't pursue it any longer. Questrade quite possibly has the worst customer service of all time. Ever. Can't wait until I have $50k. I should probably send v_tofu to their office with his shotgun and a DRIP form.


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## Toronto.gal (Jan 8, 2010)

Argonaut said:


> DRIP couldn't be setup because I had sent an emailed signed copy of the DRIP form and not one in the regular mail.... Can't wait until I have $50k.


This surprised me as all I had to do was call my broker and it was set-up right away. Why does Questrade need the request by mail? 

I'm sure you know already, but just in case, remember accounts held by family members are also taken into account for the $50K, if you live at the same address.


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## humble_pie (Jun 7, 2009)

t.gal i suppose we could consider adopting argo. For such a young man he's a helluva good investor. Though i never did understand his presentations on silver.


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## Toronto.gal (Jan 8, 2010)

Sure HP, he's intelligent, nice & polite enough, though not young enough to be my son, but who's counting.


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## humble_pie (Jun 7, 2009)

who's talking about a son. I seem to remember something about chateau lake louise ... yourself ... & ... another ... youthful ... member


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## Toronto.gal (Jan 8, 2010)

LOL, I'm a bit slow this morning; hmmm, nothing escapes you, does it HP?. 

King Tut: I like your username.


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## Cal (Jun 17, 2009)

I am pretty sure that page was written to drippers who were already dripping companies prior to the TFSA being created.

So for those people, if they were already dripping MFC, they would have to get a share certificate to deposit in a brokerage to hold within their TFSA.

I agree with you, to start a portfolio, I would simply buy the stocks that I wanted to hold in a TFSA and drip. Simple.

Or if I already had MFC dripping, and I wanted to hold more in a TFSA, I would open a TFSA and buy more. But not everyone is able to do that b/c of their cash flow.


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## Sherlock (Apr 18, 2010)

So the lesson here is, if you want to DRIP in a TFSA don't do it with Questrade?

I thought Questrade is geared more toward active traders rather than people who want to DRIP?


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## zoya (Mar 20, 2011)

_"Toronto.gal: This surprised me as all I had to do was call my broker and it was set-up right away. Why does Questrade need the request by mail? "_Questrade needs to have a signed copy of the request for DRIP per account. When I asked why they said it was the company policy. They are very paperwork oriented. However for any new stock added to the account, I just need to call them.


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## Argonaut (Dec 7, 2010)

zoya said:


> _"Toronto.gal: This surprised me as all I had to do was call my broker and it was set-up right away. Why does Questrade need the request by mail? "_Questrade needs to have a signed copy of the request for DRIP per account. When I asked why they said it was the company policy. They are very paperwork oriented. However for any new stock added to the account, I just need to call them.


This doesn't make any sense. I did my entire application process online with virtual signature and no mail. Why the hassle with the DRIP?

My policy on silver is simple. I was bullish when it was under $20 and bearish when it was acting like it wanted to hit $50. Right now it's in a place where I'm indifferent to it. Target price is 1/50 of gold.

I live alone, but if someone wants to shower me with money by all means I'm up for adoption!


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## King Tut (May 3, 2009)

Argonaut said:


> I have sent about four hundred and seventy thousand messages to them instructing them to setup a DRIP in my TFSA. At first I got messages of assurance that the DRIP had been setup, or was going to be. Still I only received cash dividends instead of one or two whole shares. And finally, months later the last message I got was that the DRIP couldn't be setup because I had sent an emailed signed copy of the DRIP form and not one in the regular mail. And of course this was during the postal strike. This despite the fact that it was easy enough to apply for two accounts all online without any mail whatsoever.


I use their 'live help' (chat) feature when I wanted to send my ID and it would not upload. They provide a fax number, which I used to send the ID. I have not sent a DRIP form yet as I am still waiting for my first trade to go through, but I will let you know how it goes!


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## King Tut (May 3, 2009)

Toronto.gal said:


> This surprised me as all I had to do was call my broker and it was set-up right away.


Who is your broker Toronto gal?


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## King Tut (May 3, 2009)

Toronto.gal said:


> King Tut: I like your username.


Same here


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## King Tut (May 3, 2009)

Cal said:


> I agree with you, to start a portfolio, I would simply buy the stocks that I wanted to hold in a TFSA and drip. Simple.


So I am interested in RY, which is currently selling around 54$/share. The EPS is 3.85$. Since dividends are distributed quarterly, the dividend per share per quarter is 3.85$/4 or about 0.96$. Since synthetic DRIP does not allow fractions of shares to be Dripped, I would therefore need to have at least 57 shares in order to get 1 share dripped into my account every quarter. That is, provided that the share price does not go up!!! Is this how it is? it means I would initially have to buy 57 shares x 54$/share = 3078$ worth of shares!!


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## GOB (Feb 15, 2011)

King Tut said:


> So I am interested in RY, which is currently selling around 54$/share. The EPS is 3.85$. Since dividends are distributed quarterly, the dividend per share per quarter is 3.85$/4 or about 0.96$. Since synthetic DRIP does not allow fractions of shares to be Dripped, I would therefore need to have at least 57 shares in order to get 1 share dripped into my account every quarter. That is, provided that the share price does not go up!!! Is this how it is? it means I would initially have to buy 57 shares x 54$/share = 3078$ worth of shares!!


That's not how dividend payouts are determined. The dividend is 54 cents a share per quarter. So even worse news - you need at least 100 shares!

http://www.google.com/finance?q=TSE:RY


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## King Tut (May 3, 2009)

GOB said:


> That's not how dividend payouts are determined. The dividend is 54 cents a share per quarter. So even worse news - you need at least 100 shares!
> 
> http://www.google.com/finance?q=TSE:RY


How is the quarterly dividend calculated? how come it is much less than the EPS/4? could someone please explain?


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## Cal (Jun 17, 2009)

King Tut said:


> So I am interested in RY, which is currently selling around 54$/share. The EPS is 3.85$. Since dividends are distributed quarterly, the dividend per share per quarter is 3.85$/4 or about 0.96$. Since synthetic DRIP does not allow fractions of shares to be Dripped, I would therefore need to have at least 57 shares in order to get 1 share dripped into my account every quarter. That is, provided that the share price does not go up!!! Is this how it is? it means I would initially have to buy 57 shares x 54$/share = 3078$ worth of shares!!



If your math is correct. Then yes. You need enough dividend money to come in to purchase at least 1 share. Otherwise the dividend money would be deposited into your account as cash.

That is why the dripprimer.ca site shows people who can't afford to buy that many shares at once how to accumulate them a little cheaper, then transfer the shares into a TFSA.


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## Sampson (Apr 3, 2009)

King Tut said:


> How is the quarterly dividend calculated? how come it is much less than the EPS/4? could someone please explain?


Companies don't payout all their earnings as dividends.


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## Toronto.gal (Jan 8, 2010)

King Tut said:


> Who is your broker Toronto gal?


I'm with CIBC Investor's Edge [like your name because since I was a child I have been fascinated with King Tut and ancient civilizations]. 

Seems like you're not understanding the dividend payment:

- current RY share price: $53.50

- next dividend payment on Aug.24th: $.54 

$.54x 100 shares = $54, which is approx. price of 1 RY share today.

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

So yes, you would need at today's prices, 100 shares to DRIP 1 full share, but to allow for price fluctuation & to ensure every quarter you have enough to DRIP at least one share, you would need around *110 shares*, not 57. 

With CM, because the dividend is higher, you need around 90 shares at today's prices.

So King Tut, you need to buy more shares to DRIP; you can afford them, right KT?


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## Lephturn (Aug 31, 2009)

My main reason not to drip is to free up cash to hedge or re balance. I don't necessarily want to DRIP into all my dividend payers - I want to take all of the dividends and pool them to plow into the one that got hammered but still has solid dividends and good potential upside.

Also as I use options as well, it works better for me to use round 100's of shares and not little bits here and there.


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## King Tut (May 3, 2009)

Sampson said:


> Companies don't payout all their earnings as dividends.


Do they use part of the earnings to invest in the company?


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## King Tut (May 3, 2009)

Toronto.gal said:


> http://www.rbc.com/investorrelations/ir_dividend_common.html


Thanks for the link, it is really neat and shows how the dividends have been growing over the years. 

[as for the affordability part, I am working on that  KT is good as gold]


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## King Tut (May 3, 2009)

Lephturn said:


> My main reason not to drip is to free up cash to hedge or re balance. I don't necessarily want to DRIP into all my dividend payers - I want to take all of the dividends and pool them to plow into the one that got hammered but still has solid dividends and good potential upside.
> 
> Also as I use options as well, it works better for me to use round 100's of shares and not little bits here and there.


Thanks for sharing your viewpoint, Lephturn. I am still exploring stock options, but until I have a better understanding of it, I'd rather stick with dripping for now. I read somewhere that wealth creation is boring! which is fine, I don't see myself at this stage being an active trader. I am looking to be a long term investor.


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## Toronto.gal (Jan 8, 2010)

King Tut said:


> it is really neat and shows how the dividends have been growing over the years.


Unfortunately the share price hasn't; they were worth more in early 2010.  
The good news however, is that you only need 100 shares to DRIP instead of 150. 

To answer your earnings question, you might find below explanation & charts informative.

Net income (after taxes and expenses) is paid to shareholders and also put to use within the banks to do many things, including:

Upgrading technology
Training employees
Expanding and improving products and services
Expanding the capital base of the institutions so the stability of the system is maintained










Source: 

http://www.cba.ca/en/media-room/50-...issues/119-bank-revenues-and-earnings-profits

Ditto regarding boring wealth creation!


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## Cal (Jun 17, 2009)

King Tut said:


> Do they use part of the earnings to invest in the company?


Exactly.


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## King Tut (May 3, 2009)

Toronto.gal said:


> To answer your earnings question, you might find below explanation & charts informative.


Quite informative. Thanks T.gal.


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