Questrade Drip: Review of How To Start DRIPping

Here’s a step-by-step guide on why you may want to do a Questrade Drip and more importantly, how to do a Questrade DRIP.

If you are a DIY investor, you have probably heard about DRIPs and wondered how you can start dripping your dividends and distributions so that you get reach financial independence even faster. DRIPping is not for everyone, but it can certainly build up the positions in your investment portfolio even faster without having to pay trading commissions, which is nice.

Last updated: May 2023

This in-depth Questrade Drip post will go over:

• What a drip is
• Whether there is a Questrade Drip discount
• Whether Questrade offers fractional shares
• Pros and cons of reinvesting your dividends
• Whether you should Questrade drip and a step-by-step process on how to do so.
• And how to cancel a Questrade drip

What is a DRIP?

A DRIP stands for dividend reinvestment plan. When you get paid dividends or distributions from a company that you own, the amount that is paid is automatically reinvested for you, and you won’t incur any trading commissions when it is reinvested.

According to Investopedia, when you receive a cash dividend from a company you own, if you have a DRIP set up, that cash is reinvested into buying more shares of the company. Technically, you buy a little stock each payout (whether it is quarterly or monthly) and it is a form of dollar cost averaging.

If you think of the dividend investing and gardening analogy, using a DRIP is like taking the seeds from your plant that you collected and using them to grow another plant to bear fruit or vegetables in the spring and summer.

Questrade Drip Discount: IS There One?

There are many large cap companies that offer a discount on the market price of their stock when it is dripped. Usually the discount is between 1% to 5% off the market price.

For example, Fortis offers a 2% discount below market price on DRIP purchases. For example, let’s say that Fortis’ share price is $55.

Let’s say you have enough to drip $53.90 worth of Fortis stock. This would be enough actually, as it is 2% off the current market price of $55.

This is called the “Share Plan” with Fortis.

Some brokerages pass on this 2% discount to you if you set up the discount from the company.

However, with Questrade there is no Questrade drip discount and it’s not possible to get the discount offered by the company.

Dripprimer.ca has an extensive list of Canadian drip companies showing the discount offered etc.

Here’s what the Canadian drip company list looks like.

Does Questrade Have Fractional Shares?

When you Drip with Questrade, you are not able to drip a fractional share.

You have to have enough invested to be able to buy at least one full share. What isn’t used will be paid out in cash.

If for example, you receive $95 in dividends and the market price of the stock is $20 per share, Questrade will automatically purchase 4 additional shares for you ($80) and the remaining $15 will be paid out to you in cash.

Pros of Reinvesting Dividends

Now that you know what a Questrade drip is, here are some of the positives and negatives to consider if you are planning to reinvest your dividends.

Here are some of the benefits when you drip using Questrade.

• You can buy smaller number of shares without having to pay a commission (especially after your $50 in free commissions have ended from Questrade)
• No ‘timing the market’ with the dividend paid out, it is automatically reinvested (avoids the problem of holding cash and missing out on gains)
• Technically you dollar cost average your cash dividends
• You can DRIP everywhere you want with Questrade (RRSP, TFSA, RESP, non-registered) and whatever ETF (for example, a VXC ETF, XEQT, VTI, or even an all-in-one ETF like VGRO) or individual equity you want, including in your Questrade TFSA.
• You could set up your own Questrade drip TFSA if you wanted to for tax free investing.
• There are no Questrade drip fees or Questrade drip monthly billing charge

Cons of Reinvesting Your Dividends

Here are some negatives to reinvesting your dividends with Questrade.

• You don’t have control over how you want to invest the dividend/ distribution
• If your dividend is from a bad company, you will just be buying more shares of a bad company
• Calculating your ACB (adjusted cost base) may be complicated come tax time
• You don’t have control over the price of the company you are reinvesting dividends with
• If you need the money for your rent or your financial independence lifestyle you won’t have it since the money is automatically reinvested
• Your asset allocation can go off balance more quickly, though I suppose you could keep track of the asset allocation of your ETFs automatically with something like Passiv.
• More difficult for your dividend tracking
• Questrade Drip does not allow you to drip fractional shares
• ETFs are free to purchase on Questrade anyway.

Related: Passiv Review: An Alternative to Robo Advisors

Questrade Dividends: Should You Drip?

I can’t answer whether you should DRIP or not. As you can see above there are lots of pros and cons on setting up a DRIP.

I had set up a few DRIPs from many years ago and recently did a Questrade cancel drip and stopped the drip. I personally prefer to reinvest the cash dividends that I receive myself.

I guess I am too much of a control freak. I might consider setting up another DRIP for some solid blue chip US dollar stocks that I loathe to pay commissions on (because I don’t have enough US dollars on hand much of the time) and loathe to use Norbert Gambit to get US dollars to pay for these US dollar stocks.

It would be nice to not have to pay a commission each time.

I would definitely not DRIP if I need the dividend income to spend. Right now, I just reinvest the dividend income I receive.

Other Canadian dividend bloggers follow a different path and some seem to be a big fan of dividend reinvestment.

Some dividend investing books recommend setting up a DRIP.

How to Set up a Questrade Drip

Here’s a step-by-step guide on how to set up a Questrade DRIP, you can do it with any ETF or stock, pretty much.

• First you fill out this Questrade Dividends Purchase Plan authorization form (Questrade drip form)
• You can find it under Account Management on your Questrade Dashboard and it is under “Funding”
• You have to sign and date the form (you can either print and sign it and then upload it, or sign it using something like Adobe fill and sign)
• Then you upload the signed Dividend Purchase Plan Authorization form into your account
• You can also email the completed form to support@questrade.com
• To check if your Questrade DRIP has been set up, you can log in to Questrade and check the status of your request.

This post may contain affiliate links. Please see genymoney.ca’s disclaimer for more information.

If you set up a Questrade DRIP for shares of SLF.TO (for example) in your TFSA and you also have Sunlife in your non-registered account, the shares in your non-registered account will not DRIP.

You have to submit a Dividend Purchase Plan Authorization for shares in the different account in order to set that up.

How Many Shares to Buy So You can DRIP

I’ll run through an example to illustrate how you can drip with Questrade.

As of original writing, one of my favourite Canadian dividend stocks to buy and hold, Fortis (FTS.TO) is $52.48 per share. The current dividend is $2.02 annually, or $0.505 per quarter.

How many shares do you need to be able to DRIP one share each quarter when the dividend is paid out?

Assuming that the price stays relatively the same over the next year (e.g. and doesn’t go over $60 a share), you would need around 120 shares to have a comfortable DRIP each quarter.

$52.48 x 120 shares= $6297.60 (plus the commission to buy) done before the ex-dividend date.

On the next dividend payout, you would be paid out 120 shares x $0.505= $60.60 cash.

Let’s say at the next dividend payout the market price is $55.00.

On the day of the cash payout: $60.60-$55.00= One FTS.TO share DRIPped and $5.60 cash balance remains.

Now you have 121 (beautiful) shares of FTS.TO and $5.60 in cash.

As you can see, it’s a great way to save on commission fees and add to your favourite dividend paying stocks.

I downloaded the Dividend Pro app so I can see when the ex-dividend dates are (and know when to invest to optimize my dividend payouts).

How to Cancel a Questrade DrIp

However, as mentioned earlier, if you are buying a bad company you may be buying more of a bad company.

One of my DRIPs was still ‘turned on’ to my horror.

I did a quick Questrade chat and asked them to cancel the DRIP on that equity that I held.

It was straight forward and the customer service representative completed the task easily. As the months passed, I waited for the dividend to get paid out, and waited with bated breath to see if the dividend would be reinvested. I half thought something would go wrong, especially since you often pay for what you get.

However, it worked and I did not get the dividend reinvested that day.

Here’s how to cancel a Questrade DRIP (without accidentally selling your shares!):

• You can email: support@questrade.com
• Contact Questrade via the chat function (this is what I did)
• You can call Questrade at 1-888-783-7866 (Monday-Friday 7:30 am to 8:00 pm EST)

You have to provide notice of your plans for cancelling your Questrade DRIP at least 30 days before the record date for any dividend.

Obviously if you sell all your shares, you will cancel the DRIP automatically because you don’t own the shares anymore.

Drip Investing in Canada

With a Questrade drip, you don’t have the discount that a company would provide you.

For example, many dividend paying companies give you a discount of e.g. 2% for signing up for their DRIP program, and they allow you to buy partial shares or fractional shares.

The Questrade DRIP is considered synthetic, so you don’t get the 2% Questrade drip discount (an example discount).

With Questrade DRIP, you also can only buy WHOLE shares, not partial shares.  When you set up a Questrade DRIP, you purchase the largest number of whole shares based on the current market price of the dividend payment you get paid out.

There is no Questrade drip partial shares.

Also, if you are DRIPping an ETF for example, it’s a bit of a moot point, since buying ETFs with Questrade is pretty much commission free anyways (well, you pay pennies for things like Questrade fees in the form of ECN fees) but you could automate your ETF investing with Questrade ETF drip.

Using a Questrade DRIP plan would be helpful for individual stocks since there is a commission of around $4.95 for each trade.

An alternative to DRIPping is using something like Wealthsimple Trade as your brokerage. It is $0 commission to buy shares and individual stocks. So you can buy just one share and not have to pay commissions. Therefore, you can do your own Wealthsimple Drip but it will have to be manually, they don’t do it automatically.

However, for US stocks within Wealthsimple Trade you will get charged foreign exchange (you can’t transfer US dollars to Wealthsimple) and it seems that is how they make money. You can only contribute Canadian dollars and exchange them for US dollars within Wealthsimple to make US dollar purchases.

I hope that you found this useful to decide whether or now you should set up a Questrade drip for your investment portfolio. It’s not for everyone, but if you have conviction of a particular business and would love to see more and more shares owned over time (without effort) then setting up a drip may be for you.

You may also be interested in:

• How are dividends taxed in Canada?
• Covered Call ETFs in Canada
• Best way to invest money in Canada
• Questrade review

Do you use Questrade DRIP?