REINVESTMENT OF DIVIDEND
The dividend reinvestment program can be activated for clients with a custody account in the EU (IBEU) and in the UK (IBUK). The dividend reinvestment program can be activated online in the account management (Client Portal).
Menu items may vary by account type and are described for Individual, Joint, Trust, IRA as well as Small Business Accounts here.
Instructions: DRIP in account management activate
Examples of Dividend reinvestments
The following example illustrates the benefits of a dividend reinvestment: Two investors want to invest in a dividend-paying share with a Dividend yield of 5 percent invest. Both invest over the same periods 10,000 euros on. Investor A opts for a payout without reinvestment, while investor B reinvests his profits. (Note: costs/fees are not included in the example for the sake of clarity).
| Investment horizon | Investor A (payout; no reinvestment) | Investor B (with reinvestment) |
|---|---|---|
| After 20 years: | 20,000 euros | 26,000 euros |
| After 30 years: | 25,000 euros | 43,000 euros |
The advantages of DRIPs:
Protection against inflationDividend shares offer attractive potential returns and help to protect your assets against inflation. The long-term rise in the price level can lead to money being devalued if it cannot generate sufficient returns.
Making the most of the compound interest effectInvestors can achieve exponential growth of their assets by making maximum use of the compound interest effect. If you use DRIPs and reinvest your profits, the basic sum that generates further returns for you increases significantly faster.
Quick and easyManual reinvesting is time-consuming and tiring, as you have to regularly check when dividends are paid out. DRIPs from CapTrader work automatically - once set up, you no longer need to constantly monitor your portfolio!
Frequently asked questions about DRIP
Which accounts are eligible to participate in the Dividend Reinvestment Program?
The dividend reinvestment program can be activated for clients with a custody account in the EU (IBEU) and in the UK (IBUK). The dividend reinvestment program can be activated online in the account management (Client Portal).
Which shares are included in the dividend reinvestment program?
Only shares that are listed on American and Canadian stock exchanges and pay cash dividends are eligible.
When will reinvestment take place?
If you are a shareholder of a security beyond the dividend record date and have activated a dividend reinvestment program, the dividend paid will be used to buy more shares in that security on the trading day after we receive the dividend payment.
If a customer does not pass the credit check on the dividend date, the system checks the next 30 days and as soon as the credit rating is given, new shares are purchased through the DRIP (Direct Reinvestment Program). In this case, a delayed DRIP trade (e.g. trading day after the payment date) is carried out. In addition, all dividends received will be reinvested within the first 30 days after enrollment in the DRIP. Please note that reinvestments in shares are not purchased through a reinvestment program financed by issuers, but on the open market.
At what price will the reinvestment be made?
Since shares in the open market are generally purchased at or near the opening price of trading and subject to trading conditions, the price cannot be determined until the shares of all participants in the program have been purchased by combined funds. If the purchase is made through many small trades at varying prices, participants will receive the weighted average price of such shares (e.g. each participant will receive the same price). If the reinvestments cannot be made, each participant receives shares on a pro-rata basis (based on the dividend number to which each participant is entitled).
Are all earnings available for the dividend reinvestment program?
No. Only net earnings, less commissions and taxes (if withholding tax is withheld for the account) are reinvested.
Are dividends from shares acquired through margin eligible for the Dividend Reinvestment Program?
Yes. While IB will attempt to recover all shares of the loan program through the reinvestment program prior to the dividend record date, in the event IB is unable to recover these shares in a timely manner, account holders will be paid a cash payment approximating the dividend payment. The payment in approximate amount of the dividend payment will be used to purchase additional shares of value.
Are dividends from shares borrowed through the IB Income Optimization Program eligible for the Dividend Reinvestment Program?
Yes. While IB will attempt to recover all shares of the loan program through the reinvestment program prior to the dividend record date, in the event that IB is unable to recover these shares in a timely manner, account holders will be paid a cash payment approximating the dividend payment. The payment in the approximate amount of the dividend payment will be used to purchase additional shares of value.
Is dividend reinvestment dependent on a commission change?
Yes, the usual commissions are applied for buying/selling. Please use our info page for details on Commissions.
What happens if my account has a margin deficit while I am participating in the reinvestment program?
If you have a Margin deficit and are unable to open new positions, the Dividends are not reinvested, even if you have activated the dividend reinvestment program.
Can account holders choose which shares to use for reinvestment?
Yes, the dividend reinvestment program can be switched on or off for the entire portfolio as well as for individual positions. It is possible to select which shares can be used in the reinvestment program.
What happens if the dividends are not enough to buy a whole share?
The holding of fractional shares in the securities account is only simplified for limited instances. Each securities account that is not authorized to hold fractional shares receives the dividend that is not sufficient to purchase a whole share as cash.
Does the dividend buyback program include only normal cash dividends or are all special cash dividends allowed?
All cash dividends are allowed.
What tax issues need to be considered in connection with dividend reinvestment?
The purchase of stock by the DRIP is similar to the purchase of any other stock for the purpose of tax reporting.
Open a securities account now and use Reinvesting dividends
At CapTrader you can not only use the dividend reinvestment program - through the SmartRouting function you always buy and sell shares at the best price and especially easy.
This is because the automatic order routing takes over the selection of the exchange that is favorable for you and sends your order to the trading venue with the lowest price.