Monday, December 17, 2007

DRiPs - Registering Shares to Your Name

This is the second installment of my series on DRiP investing.

Registering Shares to Your Name

To participate in a company's DRiP, your shares of that company must be registered to your name. What does this mean?

When we purchase shares through a broker, our broker buys the shares and keep them for us, simply making an entry into their books (more likely a database) that X of those shares belong to you. As a result, the company does not know that you own those shares.

To enroll into the company's DRiP, the company must know about you. So, only shares registered to your name will do. If you already have shares that you purchased through your broker, you simply have to call your broker and ask for the shares to be registered directly to you. Your broker will charge you a fee for this (usually in the range of $30 to $50). Once this is done, your shares will no longer appear in your account at the broker, and you will receive a paper certificate showing your ownership of those shares.

Important Note: The certificate is valuable, since it is the proof of your ownership of the shares. You should keep it somewhere safe, like in your bank's safety box.

Once the shares are registered to your name, you will now appear as one of the owners in the books of the company. As such, you will be allowed to enroll in its DRiP and SPP.

There are ways to purchase shares of the company without going through a broker, and which are less expensive. I will address this in a future installement of the series, once all the basic features of dripping have been covered.

2 comments:

Joe said...

Hi,

Which broker do you deal with? I'm with ShareOwner Investement, and I think this is done automatically.

Frog of Finance said...

Although I have an account at Canadian ShareOwner Investments, it is not my primary broker. The limited options for stock is a serious drawback, and nowadays their commission structure is no longer the cheapest option. The major advantage they offer is full dividend reinvestment, although with a delay.

For my primary broker I use Disnat, which is the discount brokerage of Desjardins Credit Union. Not the most cost-effective broker, but when I first opened an account it was the easiest for me, since it was easy to link it to my day-to-day bank account.