Overview

With dividend reinvestments, you can automatically reinvest your cash dividends into additional shares or fractional shares of the underlying stock. This means that when you receive a dividend, instead of getting paid out in cash, the money is used to buy more of the same investment.

Advantages of dividend reinvestments

Dividend reinvestments offer several advantages:

• Compounding returns: Reinvesting dividends allows you to buy more shares, which can lead to even more dividends. This can create a snowball effect, increasing your investment's growth potential over time.
• No commission: You typically don't pay any commission when reinvesting dividends.
• Fractional shares: You can buy fractional shares, so every dollar of your dividend is put to work.
• Dollar-cost averaging: Dividend reinvestments help you participate in dollar-cost averaging, which can reduce the impact of market volatility.

How dividend reinvestments work

When you turn on dividend reinvestments, your dividends are automatically used to purchase additional shares or fractional shares of the same investment. This usually happens when the dividend lands in your account within market hours, or within 1-2 business days when the applicable market is open.

Important notes:

• Shares are purchased in the open market, not through an issuer-sponsored reinvestment plan.
• Dividends are paid in the same currency as the account where you hold the stock or ETF.
• You can turn dividend reinvestments on or off at any time.

Foreign exchange fees and dividend reinvestments

If you hold USD investments in a non-USD account, we'll charge foreign exchange fees when reinvesting USD dividends to purchase USD securities. This is the same way we apply foreign exchange fees on regular orders.

Tax implications

Dividend payments are considered income and are taxed accordingly depending on the account type where you hold the dividend-paying stocks.

• Registered accounts (like TFSAs and RRSPs): Dividends earned in registered accounts aren't taxed.
• Non-registered accounts: Dividends earned in non-registered accounts are taxed as income.

For more information on how dividends are taxed, please consult a tax professional.

Related articles

• View your dividend reinvestment activity
• Turn dividend reinvestments on or off
• Troubleshooting dividend reinvestments