Recently, Tim Hortons (TSX: THI) announced that it is offering shareholders a Dividend Reinvestment and Optional Cash Purchase Plan (I found this out through the Canadian DRIP Primer). In the press release accompanying the announcement, Tim Hortons said that the Plan allows shareholders to purchase shares in “an economical and convenient way”. The Tim Hortons DRIP and SPP may be a convenient way to accumulate shares but it is a joke to call it economical. Here are some of the fees shareholders will be charged to participate:

Enrollment Fee: $8.25
Reinvestment of Dividends: 5% of amount reinvested, up to a maximum of $3.00 plus $0.03 per share purchased.
Optional Cash Payment (via cheque or one time online bank debit): $5.00 per transaction plus $0.03 per share purchased.
Optional Cash Payment (via Pre-authorized Debit): $2.50 per transaction plus $0.03 per share purchased.
Sale of Shares: $15.00 per transaction plus $0.12 per share sold.

DRIP investors are the type of investors a company should be looking for: long-term, buy-and-hold investors who behave as part-owners of a business. Many companies offer a discount to shareholders participating in their DRIPs but Tim Hortons is instead choosing to ding them with a 5 percent premium. A $5.00 fee on optional share purchases defeats the purpose of a SPP, which is to offer a low-cost way for small investors to accumulate shares. Tim Hortons should wake up and smell the coffee: you can’t pretend to be shareholder friendly by offering a DRIP and then sock participants with steep fees at the same time.

This article has 19 comments

  1. I completely agree that its not very economical. Companies in this environment, where capital still trades at a premium, should be strongly encouraging investors to re-invest their dividends rather than throwing fees in their way. Some investors will participate, but why wouldn’t I just pay the trading commissions at my broker on a quarterly basis and buy individual shares with my THI dividends then participate in this plan? Plus I didn’t read anything in their release about fractional shares which add another incentive for investors to participate.

    Clearly someone didn’t do their homework to compare to other plans or the company simply doesn’t care and believes that investors will participate regardless; which I believe is their error.

  2. This reminds me of what is happening with ETFs. New expensive ETFs are sullying the good name “ETF”. Tim Hortons is apparently a pioneer in sullying the good name “DRIP”.

  3. I believe through my TD Waterhouse account I can set up a “drip” for Tim most companies (Bell, BMO, TD, etc.,) which simply takes the dividend and buys whole stock (so it is actually a DRIP run by TD, but with the permission of the Stock Company). There is no charge, it’s disadvantage is that you can’t buy partial stock, so you lose out if you don’t get enough dividends to buy stock, but it is also “free”. Wonder if I can do this with Tim Horton’s? I’d have to buy the stock first of course…

    C8j

  4. A better deal may be to go with something like ShareOwner Investments which is a co-op broker kind of like a share builder type of plan. They do automatic reinvestment of dividends, fractional share purchases, and have a fairly wide selection of shares to pick from.

    Though people who are used to a discount or full service broker probably wouldn’t go that route, many people would probably benefit from this style of plan since it would avoid the desire to ‘adjust’ things all the time and keep your fees as low as possible.

  5. Of course you could synthetically DRIP this, or any other equity available through a broker, as I do in my RRSP. But I also DRIP other companies as I like the no-fee, dollar cost averaging that I get through long term, compounding DRIPs and SPPs.

    There is a large, but silent group of Canadian investors who enjoy this method of investing in large, Canadian companies as a direct shareholder. Which is why when the iconic Tim Hortons released their plan, it was such a shock to see them stand out and charge dissuading fees.

    Also, as I pointed out in my letter to Tim Hortons, they identify themselves as offering beverages and food at a great value, but when it comes time to responding to the demands of their shareholders they chose to distinguish themselves and charge unnecessary fees.

    I encourage everyone, DRIPer or not, to send an email to Tim Hortons, asking them to reconsider the fees in their plan.

    Thanks to CC for raising this issue here.

  6. Shareholders get the shaft again. The boards are too pre-occupied with their own buyouts and salaries. This looks like a way for the company to make money by making money from the shareholders who then “share” in the profits earned by the company and then reinvest their profits at a fee so the company can make money, so the investor shares the profit and reinvest that profit for a fee…..Looks to me like it goes round and round…..like a donut.

  7. Lousy DRIP coffee, lousy DRIP = what a surprise…

  8. Jon D. is insightful, as usual.

    3 cents a share commission reminds me of the bad old days of Canadian discount brokers. I switched brokers around 2003 after paying $800 for a single trade. I switched to a broker with a $250 maximum commission per trade. Obviously, this was before the advent of $9.99 flat trades.

    (At the time, I was purchasing 40,000 shares of a $2.00 stock).

  9. Matt S (Vancouver)

    I guess if it really mattered, shareholders could submit a proposal for it to be brought up at the annual general meeting.

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  15. THI was probably lead astray by the Transfer Agent whom is the real winner in this game. There are costs associated with DRP programs that companies usually subsidize. As someone stated earlier, DRPs allow shareholders to re-invest for the long run in companies they admire and believe will be around in the future. Companies pay out less and preserve capital yet remain attractive to investors ultimately seeking yield. THI missed the boat on this one – hopefully they amend the plan asap so Canadian’s can share in the success of a brand icon.

  16. Wowzers…you’d think Timmy’s would offer a better DRIP and SPP plan than that! Good job CC for bringing this to light. Personally, I’m not overly enthused regarding THI’s dividend and have not invested in any shares. A yield of roughly 1.2% is just not good enough. I have bought some second cup however.

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  19. When Tim’s wakes up to no-fee drip-spp investing, I will be standing in line. Until then I will be standing in the line of companies WHICH DO NOT charge exorbitant fees.