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Investing/Strategies / Drip Investing - The Basics
|Subject: Re: How Do You Know When to Stop??||Date: 9/5/2001 12:39 PM|
|Author: OperaBob||Number: 20457 of 27788|
Re: Our mutual love of DRIP accounts
One thing I have is 3 Canadian bank stocks. In Canada we have what are referred to as "The Big 5".
The Royal Bank of Canada-recently renamed RBC Financial as it expands into the US. Canada's largest bank.
The Toronto Dominion Bank of Canada-better known to you as TD Waterhouse
The Bank of Montreal
Canadian Imperial Bank of Commerce
The Bank of Nova Scotia
Canadian banks have historically returned 15% and trade at lower multiples than US banks.
The Royal and TD do not have DRIPs. BMO, BNS & CIBC do.
As one bank in Canada does so do they all so it would seem senseless to DRIP all three. But there is a logic here:
About 3 years ago the Royal was set to merge with BMO and TD with CIBC. Hads that occured the resulting 2 banks would have been in the top 10 largest banks in the world. So I've been DRIPping the 2 extra banks in anticipation of this event.
Unfortunately at the time an election was going on and it was deemed politically correct to nix the mergers at the time. The public was complaining about reduced competition and bank charges. Whenever people do that to me I always ask, "Why don't you buy some bank stocks then and get your fees back as dividends?" They always answer, "I can't afford to buy bank stocks." At this point my wife, "Buffy the Berkshire Killer's" eyes roll up as I answer, "Have you heard about DRIPs?" and then I proceed to bore the heck out of everyone at the party except for the other investing nerds.
As the election has become a distant memory it appears the federal government is setting the stage to allow the mergers to proceed (although now it looks like TD will go solo and BMO and BNS might merge). This will be a "natural selection" method to reduce the number of DRIPs I have and at the same time be a great benefit to me.
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