Updated: April 2025  |  bremo.io financial guides

DRIP Investing Canada 2025 — Dividend Reinvestment Plans Explained

A Dividend Reinvestment Plan (DRIP) is a feature that automatically uses dividend payments to purchase additional shares of the same investment rather than paying out cash. It's one of the most powerful and effortless ways to accelerate portfolio compounding over time.

How DRIP Works

When a company or fund pays a dividend, instead of depositing cash to your account, the DRIP automatically purchases additional shares — often fractional shares — with the dividend amount. Over years and decades, the compounding effect of continuously reinvesting dividends can dramatically increase total returns.

Types of DRIPs in Canada

Company-Sponsored DRIP

Offered directly by the corporation. Often allows share purchases at a slight discount (1–5%) to market price. Requires holding shares in your own name (not at a brokerage) via a transfer agent. Limited to specific companies that offer the program.

Synthetic DRIP (Broker-Sponsored DRIP)

The most common form for Canadian investors. Your brokerage uses dividend payments to purchase whole shares on the open market at market price. No discount, but available for most dividend-paying stocks and ETFs through any supporting brokerage. No paperwork required.

Which Canadian Brokerages Support DRIP?

Most major Canadian discount brokerages support synthetic DRIP:

• Questrade — DRIP available on eligible securities
• Wealthsimple Trade — DRIP available on eligible securities (fractional where possible)
• TD Direct Investing, RBC Direct Investing, BMO InvestorLine — DRIP available
• Wealthsimple Invest (robo-advisor) — automatic reinvestment built in

DRIP Tax Treatment in Canada

In a non-registered account, dividends are taxable in the year received — even if reinvested through DRIP. The shares purchased through DRIP have a cost basis equal to the dividend amount used to purchase them. Keep records for accurate capital gains calculations when you eventually sell.

In a TFSA or RRSP, dividends are not taxable regardless of DRIP — reinvested dividends simply grow the account tax-free or tax-deferred.

DRIP for ETFs

All-in-one ETFs like VGRO and XGRO already reinvest distributions internally at the fund level. If you hold them through a broker that supports DRIP, distributions are reinvested into more ETF units. For most passive investors, enabling DRIP on their ETF holdings is the easiest way to ensure every dollar of return stays invested and compounding.