NB: For an updated list of my picks for 2010, check out Best Canadian DRIPs 2010.
This ranking is somewhat arbitrary insofar as it is based upon my own opinions and preferences as a long-time DRIP investor, but I am basing it on certain objective and easily obtainable criteria, such as:
(1) whether the plan offers a discount on reinvestment,
(2) whether it requires a minimum amount for making an optional cash purchase (and how much it is),
(3) how often it invests (more frequently is better),
(4) how often it increases its dividend,
(5) the current dividend yield,
(6) how often the stock tends to split and
(7) which Transfer Agent is used (I find Computershare easier to deal with; more user-friendly statements)
I’m also only going to evaluate Canadian corporations. I have purposefully omitted the many income trusts and income funds that have DRIPs because by 2011 some of them may have converted back into a corporate structure and may no longer offer DRIPs. In the past few months, some of these trusts have already suspended their dividend reinvestment plans. So based on these major criteria, here’s my ranking for the best DRIPs for the long-term, buy-and-hold DRIP investor. The links I have included direct you to the relevant Investor Relations pages. If the links change over time, you can go back to the company’s home page and find their IR centre from there.
Best Canadian DRIP Investments
1. Bank of Montreal (monthly, Computershare, frequent increase, no minimum, splits)
2. Bank of Nova Scotia (monthly, Computershare, frequent increase, splits)
3. TransCanada (discount, Computershare, frequent increase)
4. CIBC (monthly, frequent increase, yield)
5. Enbridge (discount, frequent increase)
6. Telus (Computershare, frequent increase, growth)
7. BellAliant (monthly, no minimum)
8. Suncor (Computershare, splits, growth)
9. TransAlta (growth)
10. Canadian General Investments (Computershare, diversified)
Two other factors not taken into account here that you might want to consider also are (1) how quickly the company cashes your cheque (I find this convenient – sometimes you can wait 2 months or more before they take it; the alternative is to figure out when they cash it exactly so you can send it just beforehand. But your timing has to be very good.) and (2) the ratio of share price to yield: so you can see how quickly your money can grow through reinvestment.
A stock price of $100 and only a 1% yield will take much longer to snowball than a stock price of $40 and a 5% yield. And obviously, of course, you want to think about the company itself and if that’s a company you want to invest in at all. I did not include Pulse Data, for example, because I am not convinced yet that it is an investment for me. It does, however, have a DRIP plan you can check out.
Why the above criteria? Over time they have been what makes any DRIP plan great, in my opinion. This can include simply being more convenient, but factors like the discounts on reinvested amounts can help with growth.
If you have a stock that (1) splits regularly, (2) offers a discount on reinvestments, (3) increases its dividend yearly (or more), and (4) enjoys overall earnings growth, you have an excellent DRIP stock and you’ll get really excited about it. That’s why I’d have to say Bank of Montreal is one of the most exciting DRIPs. But you may have other favourites. If you’re already invested in some of these DRIPs, what do you think of this ranking?
Another factor to include in a future rankings list would be which of these companies’ plans is open to foreign investors. In a future post (perhaps with the help of a friend south of the border), I’ll include a ranking of some of the best US DRIPs. This will be much harder to evaluate since there are so many of them. Feel free to send me in your favourites.
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from:
http://www.cgi.com/web/en/investors/faq.htm
Does CGI pay a dividend? What are the expectations for future dividends?
In fiscal 2008, considering the needs of reinvestment into its operations and the size of the investment projects, the company does not expect to pay dividends. For the future, the company will evaluate annually whether or not to pay a dividend.
@kplus – thanks for that update. Good point: readers should be aware of the difference between CGI, the computer/IT firm, and CGI (Canadian General Investments), which is the link to the DRIP that I have above.
CGI the IT firm does not have a DRIP plan, let alone pay any dividends to warrant having a DRIP plan.
I’ve watched CGI for years and it reprensents something of an enigma.Although it is a well managed investment trust traded in Canadian dollars and sterling (via its listing on the LSE) CGI has a few warts;
1. the expense ratio is a whopping 2-3% with a dividend of c.1.5% where similar British IT expense ratios are under 1% with a dividend of 2-3%
2. The discount to NAV (net asset value) oscillates between 20% and 30% — a staggering margin
3. In some ways, CGI’s portfolio has come to reflect Canada’s malaise as NAFTA, the rise of BRIC and the asian tigers and a steepening dollar have pushed manufacturing eastwards and south of the border, leaving a diminishing range of investments conventrated in resources and finance.
Nevertheless, CGI is well managed and will benefit should inflation emerge from quatitive easing and stimulus packages. CGI holds its own against its nearest rival, Economic Investment Trust (EVT-T) which is more diversified having only half its portfolio in Canadian assets. If possible, I would be be delighted if EVT had a DRIP-linked savings scheme as CGI maintains with Computershare so I could run the two together on a 50-50 split in a TFSA. Ideas?
@Rory – good points. I’m finding I’m taking a second look at CGI again, too. I’m not familiar with EVT. What do you think about straight ETF plays – cheaper. You could “DRIP” them through Canadian ShareOwner.
I looked at Canadian Shareowner, MoneyEnrgy, but they charge $50 p.a. just for the TFSA — Questrade might be better for the small-scale investor, allowing transfers in from non-TFSA savings schemes as CGI shares could be shovelled in from time to time. Aberdeen Asia-Pacific Income (traded on the TSE but possibly one of Aberdeen’s UK registered IT’s) has a Canadian dollar DRIP through CIBC-Mellon too, but no joy yet on EVT and its sister Canadian IT, United Corporations. Canada Trust Income might be worth a look too.
@Rory – I don’t use ShareOwner for the TFSA, so I didn’t know that. Thanks for pointing it out. I have a TFSA in Waterhouse — no annual fee there.
Hi, great site! Have you since updated your top 10 DRIPs in Canada? If so please could you post it. Would you still rank BMO as #1? I am a beginner and would like to start with 1 DRIP, I am thinking of BMO as per your recommendation. Thanks!
Hi Shaila, thanks for the suggestion, I might do that. What would be my top DRIP pick now? I’m looking at TransCanada and Enbridge in particular – maybe not the banks again yet until they pull back a bit from their highs. BMO has definitely raised its profile again lately with better balance sheets and it’s been getting more positive attention from analysts.
I think I’d say TransCanada, then Enbridge. Check their prices, see if you can jump in at a bit of a discount.
Thanks for the suggestion. I have an account with a discount broker (BMO) but its an RRSP account. In order to do a regular (not synthetic DRIP) I need a non-RRSP account right? So do I need to open a non- RRSP account, or would it be easier to go with money paper.
Also I would like to open a DRIP for each of my two kids (both less than 3 years old). Any suggestions?
What book would you recommend for canadian DRIP? Thanks
@Shaila, you’re right, you need to do the full DRIP outside an RRSP. I’ve looked into MoneyPaper but the way things have turned out, I’ve stuck mostly to Canadian stocks and it’s easier to buy direct through a broker (eg., BMO) then order the certificate and use Computershare/CIBC Mellon. You can definitely open a DRIP in your child’s name, others have done this. You could ask the Computershare agent about it.
Hi,
I’m new to DRiPs and I’m currently awaiting my initial shares on BMO, Sun Life Financial, Bank of Nova Scotia and RioCan.
Your list came in handy especially in pointing me to BMO. Just wondering if you are planning to update it any time soon?
Thanks.
@Derek – yes, it’s updated – I’ll post the link back in the article again – but you can also find it in the trackbacks. I’ll put the updated version over in the sidebar, thanks. Good job getting started – let me know how it goes.