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DRIPs and SPPs

DRIP stands for Dividend Re-Investment Plan and SPP is for Shared Purchase Plan.  Lets talk about DRIPS first.

Many stocks pay out dividends monthly, quarterly or yearly. By default, these dividends with show up as cash in your brokerage account.  By enrolling in a DRIP, your dividends are automatically used to buy more shares of the stock instead. No commission needs to be paid and sometimes the stock is offered at a discount even.

Synthetic DRIP

Most brokerages offer a synthetic DRIP, although they may not advertise this very well.  In a synthetic DRIP you can only buy whole shares of a stock (in other words, fractional shares are not allowed). 

For example...

Bank of Nova Scotia

Stock Price:             $57.60
Shares Owned:         200
Quarterly Dividend:    $0.52 per share

Using BNS as an example, when the next dividend is payed, you will have $104 dollars (200 x $0.52) of purchasing power. Since one share is $57.60 your DRIP will purchase 1 share and deposit the remaining $46.40 ($104 - $57.60) into your brokerage account (since $47.40 was not enough to buy another whole share). 

To find out what shares can be enrolled in a DRIP you need to contact your brokerage. Mine doesn't advertise this on their website, but if I email them they will send me a list of all the stocks and the discount available.  Also, most brokerages are all or none, meaning you must enroll ALL of your stocks or none of can't choose individual companies to be enrolled.


In a true DRIP you are not dealing with your brokerage at all. You deal directly with the company whose DRIP you wish to use. The  main advantage is that fractional shares ARE allowed.  Although this may not seem like a great advantage over a synthetic DRIP, this small difference can truly add up over time.  Unfortunately, true DRIPs are not offered by every company that has a dividend, so you have less choice. That said, the one's that do offer true DRIPs are for the most part decent, blue-chip companies.

SPPs (Share Purchase Plans) and PACC (Pre-Authorize Cash Contributions)

An SPP allows you to purchase additional shares of a company without a commission, and often at a discount  You must be a shareholder first of course, but once you own at least one share you can purchase more by filling out a form and sending money for any amount you wish (although there is sometimes a minimum). 

Using a true SPP requires you to go the Real DRIP route.  

A PACC for stocks on the other hand is something fairly new as far as I know.  PACCs allow you to invest a fixed amount on a fixed frequency throughout the year. This was recently brought to my attention by Claymore Investments as it can be used with their ETFs and a brokerage account.  This development is exciting in that it means the ETF can be used more like a mutual fund was used in the past.  See the links below for more information. 

Further Related Links and Articles

Canadian DRIP and SPP List - Web Page - Canadian DRIP Primer
The DRIP Investing Resource Center - Website - note the site is US based but has Canadian content as well
DRIPS with SPPs - Web Page - Canadian MoneySaver
Claymore's ETFs DRIPs and PACCs - Web Page
Building wealth, a DRIP at a time - Article - The Globe and Mail