What is DRIP (Dividend Reinvestment Plan)?

Example

You hold 100 shares of XIC.TO in your TFSA. The ETF pays a quarterly distribution of $0.25 per share, totalling $25.

• Without DRIP: $25 deposited as cash in your account. You must manually buy more shares.
• With DRIP: your broker automatically purchases ~0.8 shares of XIC.TO with your $25. Quarter after quarter, your share count grows.

Most Canadian brokers offer DRIP:

• Wealthsimple: DRIP with fractional shares (every cent is reinvested)
• Questrade: DRIP in whole shares only (remainder stays as cash)
• Disnat: DRIP in whole shares only

Why It Matters

DRIP turns your distributions into automatic growth. Without any effort on your part, your share count increases every quarter, generating even more distributions the next quarter. This is compound interest in action. Activate DRIP as soon as you open your account — it is free and makes a real difference over 10-20 years.