Many companies share profits with their shareholders, which are paid out as cash dividends. Using the DRIP program offered by their online brokers, shareholders can reinvest the dividends to automatically buy additional shares of the same company. This provides investors an easy way to accumulate more shares without having to pay any commission. Hence,DRIP not only allows you to participate in a company's growth on a regular basis, it also takes advantage of dollar-cost averaging (DCA) technique that averages out the price at which you buy stocks as they move up or down.
However, it's important to note that you can only reinvest the cash dividends received from eligible stocks (or securities) in your account to purchase additional shares. Additionally, the dividends paid into DRIPs are taxed as ordinary dividends and must be reported in your tax returns, even though they are used to purchase shares.
DRIP at TD Direct Investing
You can set up a DRIP for your entire account as well as for individual securities. Once you set up a DRIP, the cash dividend is automatically reinvested.
A few notes to keep in mind:
- The amount of the dividend must be enough to purchase at least one whole share since DRIP does not purchase fractional shares.
- To set up a DRIP, you need at least one DRIP eligible security in your account.
- If you set up a DRIP for your entire account, any new eligible securities you purchase will automatically be included in the program.
To set up a DRIP in your TD Direct Investing account, contact an Investment Representative at 1-800-465-5463 or (416) 982-7686.
