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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