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DRIP: How’s that again?

in DRIP

OK, so my rant yesterday might have been a little confusing, so I figured I’d run through the entire scenario with a stock that I own, but not the actual shares held numbers for me (I am paranoid about my secrecy sometimes, I know).

Dividend Reinvesment Plans

No not that kind of Drip, Dividend ReInvestment Plans

Let’s take Sun Life Financial (stock ticker symbol SLF on the Toronto Exchange)

It’s current price is $52.41 per share Canadian . The reason I bought it was for dividends, and because I actually deal with them on a few things with my job, and figured they seemed to know how to make money (this is not an endorsement on my part, simply an explanation as to why I own shares in them).

First thing to find out is whether Sun Life offers a Dividend Reinvestment Program, and yes they do, so that is a check on the list.

What was the last dividend they paid? They paid $0.32 per common share, from their latest financial statement.

How many shares do I need to own to get a share in the DRIP program?

$52.41 / 0.32 = 164 Shares that I would have to own to get 1 share in my DRIP.

I trust the arithmetic is straight forward here. So if I own less than 164 shares of SLF they would simply credit my trading account the amount of the dividend (number of shares * 32 cents) and that would be it. If I owned 165 shares however, I would get 1 extra share of SLF in my account and some amount less than a dollar as the amount left over from the dividend.

Remember these dividends are quarterly paid as well, so if I owned the right amount of shares I might get new share certificates in my account 4 times a year. Not too shabby, I think.

This is one way to invest, it is not the only way, and for me it is one of the few ways I understand, so I stick with this for now.

{ 2 comments }

  • Big Cajun Man February 14, 2007, 11:50 AM

    The DRIP is run by the company so there usually is no fees (I haven’t heard of any, but you never know).

    As for selling, you will incur selling fees, since you will be selling them through your broker (most likely at a much later date, however).

    Reply
  • MillionDollarJourney.com February 14, 2007, 11:47 AM

    Good post! Are there typically any fees with purchasing DRIP directly from the company itself? What if you wanted to sell the shares, how does that work?

    FT
    http://www.MillionDollarJourney.com

    Reply

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