A DRIP (dividend reinvestment plan) automatically uses the dividends you earn from a stock or ETF to buy more shares of that same investment, instead of paying you the dividend in cash.

For long-term investors who are still building wealth, usually yes. Reinvesting dividends keeps your money invested and compounds over time. They make less sense if you need the income now, use dividends to rebalance, or don't want to track cost base in a taxable account.

Are reinvested dividends taxable in Canada?

In a TFSA or RRSP, no. In a non-registered account, yes. Reinvested dividends count as income in the year they're paid even though you never see the cash, and each purchase changes your adjusted cost base (ACB).

Do DRIPs cost anything?

Most Canadian brokers don't charge a commission to reinvest dividends. The ETF or fund you're buying still has its own management fee.

Can a DRIP buy fractional shares?

It depends on the broker. Wealthsimple can reinvest into fractional shares. Questrade buys whole shares only, unless you already hold a fractional position, and pays out the leftover as cash.

How long does it take to set up a DRIP?

Usually a few business days. Questrade says about two. You need to be enrolled before the ex-dividend date to have the next payment reinvested.

Can I turn off a DRIP?

Yes. Most brokers let you turn dividend reinvestment off at any time, for a whole account or for individual holdings, without selling anything.

01 Oct 2026 8 min read Investing

To DRIP or Not To DRIP? Also, What Is DRIP?

If you hold dividend stocks or ETFs, you've probably noticed small amounts of cash showing up in your account every month or quarter. A few dollars from an ETF here, twelve dollars from a REIT there. It's nice to see, but what are you supposed to do with $12.47?

That's where a DRIP comes in. I kept seeing the term in dividend forums and on my broker's settings page without really knowing what it did behind the scenes, so I looked into it. Here's what I found, in plain English.

We'll cover what a DRIP is, the math that makes it so popular, the downsides nobody mentions, and how to set one up with your broker.

What is a DRIP?

DRIP stands for Dividend Reinvestment Plan. Instead of paying your dividend out as cash, a DRIP automatically uses that money to buy more shares of the same stock or ETF that paid it.

Say you own 200 units of a REIT paying $0.10 per unit every month. That's $20 a month. Without a DRIP, the $20 sits in your account as cash until you decide what to do with it. With a DRIP, it goes back into the REIT and buys more units. Next month, you're paid on slightly more units, and so on.

There are two main flavours:

Type	Who runs it	How it works
Company (full) DRIP	The company, through its transfer agent	You hold shares directly with the company. New shares are often issued from treasury, sometimes at a small discount.
Broker (synthetic) DRIP	Your brokerage	Your broker uses your dividend to buy shares for you, usually on the open market, with no commission.

Most regular investors use the broker version, since that's where our TFSAs and RRSPs live. It's usually a toggle in your account settings.

The math - why people love DRIPs

DRIPs are basically compounding on autopilot. Dividends buy shares, those shares pay dividends, and those dividends buy more shares.

Here's a simple example. You invest $10,000 in something with a 5% dividend yield that also grows in price by 5% a year. You don't add another dollar for 20 years.

After 20 years	Take dividends as cash	DRIP
Value of your shares	~$26,500	~$67,300
Total cash collected along the way	~$16,500	$0
Total	~$43,000	~$67,300
Annual dividend income in year 20	~$1,330	~$3,360

Same starting money. Same investment. The DRIP version ends up with about $24,000 more and pays over 2.5 times the income in year 20, simply because the dividends were never left sitting around. (This ignores taxes, fees, and the fact that real markets don't move in a straight line, but the direction holds.)

The pros

1. Your money never sits idle. Small dividends are easy to forget about. I'm guilty of letting cash sit in an account for months. A DRIP puts every eligible dollar back to work on payment day.

2. No commissions. Most brokers don't charge anything to reinvest dividends, and it saves you from placing a dozen tiny orders.

3. Automatic dollar-cost averaging. You buy on a set schedule no matter what the market is doing. When prices are down, your dividend buys more shares. You never have to decide if "now is a good time," or talk yourself out of it during a scary headline week.

4. Occasional discounts. Some company DRIPs issue shares below market price, often 1% to 5% off. That's a small but free return on top of the dividend. Just know these discounts can change or disappear. Telus, for example, has been cutting its DRIP discount and is removing it entirely as of October 1, 2026.

The cons

1. You lose control over what you buy. A DRIP always buys more of the same thing. If one holding has grown to a bigger chunk of your portfolio than you'd like, the DRIP makes it even bigger. It doesn't care whether the stock is overpriced either.

2. It can mess with rebalancing. Dividend cash is a great tool for topping up underweight holdings, like using REIT dividends to buy more of your bond ETF. A DRIP takes that option away.

3. Whole shares only (at some brokers). Many brokers can only buy full shares with your dividend. If you get $20 from a stock trading at $30, nothing gets reinvested and the $20 stays as cash. Expensive stocks may never DRIP at all unless you own a lot of them.

4. The tax paperwork in non-registered accounts. This is the big one. In a TFSA or RRSP, a DRIP is completely tax-free and hassle-free. In a non-registered account, reinvested dividends are still taxable income that year, even though you never saw the cash. On top of that, every DRIP purchase changes your adjusted cost base (ACB). If you don't track it, you could end up overstating your capital gain when you sell and paying tax twice on the same money.

5. It doesn't fit every stage of life. If you're living off your dividends, or you're starting to shift toward income like I am as I aim for early retirement, you'll eventually want that cash in hand. A DRIP is a building tool, not a spending tool.

Should you DRIP?

A quick gut check:

Probably yes if you're still building wealth, the holding is in a TFSA or RRSP, and it's something you'd happily buy more of anyway, like an all-in-one ETF such as XGRO.
Maybe not if the account is non-registered and you don't want to track ACB, if you use dividends to rebalance, or if you need the income now.

You also don't have to go all-or-nothing. Most brokers let you turn DRIP on for some holdings and off for others.

Personally, I only DRIP in my GRRSP account since I don’t have many options. I used to do this in my personal brokerage account at beginning of my financial journey but I no longer do it. I want to control where my money goes. For example, I have been using some of my SmartCentres distributions to buy Dream Industrial.

How to set up a DRIP with your broker

Every broker's menus are a bit different, but the process generally looks like this.

Step 1 - Check that your broker and holding are eligible. Most Canadian brokers support DRIPs on TSX-listed stocks and ETFs. Some U.S. listings or smaller companies may not be available. Search your broker's help centre for "dividend reinvestment" or "DRIP."

Step 2 - Find the setting. It's usually under account settings or account management rather than on the trading screen. Questrade, for example, puts it under Management > Dividend Reinvestments, where you can toggle it on for a whole account or for individual securities. Wealthsimple lets you turn dividend reinvestment on or off at any time, and buys shares on the open market rather than through the company's own plan. Some banks' brokerages still ask you to call or send a form, so don't be surprised if it isn't a simple switch.

Step 3 - Choose all holdings or specific ones. Pick "all eligible securities" if you want it simple, or go holding by holding if you want to keep some dividend cash for rebalancing.

Step 4 - Watch the timing. Enrolment isn't instant. Questrade says it takes about two business days to process, and you need to be enrolled before the ex-dividend date to catch the next payment. If you're turning it on for a specific payout, give yourself a few days of buffer.

Step 5 - Understand how fractions are handled. Wealthsimple can reinvest into fractional shares, so every dollar gets used. Questrade's DRIP buys as many whole shares as your dividend allows and pays out the rest as cash, unless you already hold a fractional position. Check which one your broker does so you're not surprised by leftover cash.

Step 6 - Check your first payout. After the next dividend date, you should see the dividend come in and a matching share purchase right after. If it just shows cash, the dividend was too small for a whole share or the enrolment wasn't processed in time.

Step 7 - Track your ACB (non-registered accounts only). Your broker's cost base isn't always right, especially after transfers. A simple spreadsheet or a free tool like AdjustedCostBase.ca will save you headaches at tax time.

The takeaway

A DRIP is one of the simplest ways to let compounding do the heavy lifting. It takes the small, easy-to-ignore dividends you already earn and turns them into more shares, which earn more dividends. Inside a TFSA or RRSP, while you're still building, it's hard to beat.

It isn't perfect. You give up some control, it can throw off your allocation, and in a taxable account it adds bookkeeping. The key questions are - Do I want more of this exact holding? and Do I need this cash soon? If the answers are "yes" and "no," flipping on your DRIP may be one of the easiest wins in your portfolio.

As always, this is general education, not personalized financial advice. If you're unsure how a DRIP fits your situation, especially in a taxable account, talk to a licensed professional who knows your full picture.

Note that details are as of September 30, 2026. Broker features and company plans change, so check your own broker's current rules before acting on any of the below information.