DRIP discounts from BMO and RY
Royal Bank (TSX: RY) became the second bank to introduce a discount on its Dividend Reinvestment Program. RY is offering a 3% discount for shareholders who elect to have their dividends reinvested in the common shares of the bank. The changes will be effective starting with the next dividend payment in May. You can read the news release here.
Earlier, Bank of Montreal announced that it is offering a 2% discount for shareholders opting to reinvest their dividends. The details of the program are available in the news release.
It is easy for registered shareholders to enroll in either bank’s DRIP program and obtain the discount but what about investors who hold the shares in a brokerage account? Interestingly, both news releases have the following statement:
Eligible beneficial or non-registered holders must contact their financial institution or broker for instructions on how to participate in advance of the above date.
I called RBC Direct Investing and asked if the discount will be available for investors participating in a synthetic DRIP available through the broker. The answer is that any discount offered on the stock is passed along to the participants in the synthetic DRIP subject to certain conditions (such as no fractional shares). Though I’m very interested in the Royal Bank DRIP discount, I decided against participating because the synthetic DRIP at RBC is an all-or-nothing proposition — you can’t sign up for DRIPs in just the stocks you are interested in adding to your position. Do you know if you can obtain the DRIP discount at your broker?
[Update: Bank of Nova Scotia also offers a discount on its DRIP program. Since October 2008, BNS is offering a 2% discount for reinvesting dividends in the company's common shares. Thanks to James for pointing this out.]