As a follow-up to my previous post where I quoted a site that said ETF distributions could only be paid out in cash, I just found out from a comment on the canadiancapitalist.com that it is possible to have distributions from iUnits ETFs re-invested through a DRIP:
Dividend reinvestment plans let you take advantage of the power of compounding. Instead of receiving cash dividends from the company, you may purchase more of a company’s stock by having the dividends reinvested. Your brokerage firm may offer a dividend reinvestment plan that allows for the reinvestment of cash distributions on iUnits. Cash distributions, in the form of income, return of capital or dividends could then be reinvested in additional units of the same fund. You should check with your brokerage firm to see whether you will be charged for this service.
iUnits (Barclays) lists four companies which offer DRIPs for iUnits, three of which are Canadian big-bank brokerage affiliates. The one that wasn’t, Canadian ShareOwner Investments Inc. states “to enjoy complete dividend reinvestment and the lowest trading commissions in Canada, your iUnits need to be in an account at ShareOwner.”
The iUnits.com website goes on to say that “as demand increases, more firms will likely have DRIPS available on iUnits.”
I still can not see a huge advantage to DRIPs, except that using them would reduce the cash-drag in an investor’s account ever so slightly. I recently talked to my advisor about cash distributions the ETF I will be buying soon and our plan will be just to roll the cash into my regular monthly purchases within my RRSP.