How To Start Dividend Investing With Little Money

Dividend InvestingOne of the most challenging aspect of starting with dividend investing may be to not know how much money we need to get started. I started investing in mutual funds back in my 20’s and I was focused on building my RRSP (Registered Retirement Savings Plan) and maximizing my contributions. That’s what you were suppose to do … Well, the reality is that the benefits of RRSP when your income is low is not all that great from a tax saving perspective. It’s great that you start early since you will leverage the years of growth but wouldn’t it be nice to also get the benefits of compound growth with dividends? Let’s cover the options when you are young to put dividend investing in perspective.

Dividend Investing Options In Your 20’s

You just got your first job and you want to save some money or build a nest egg for early retirement 🙂 Chances are that you don’t have thousands of dollars available for investing. Between paying for the rent, food and transportation, you’ll probably have a few hundreds of dollars available per month to possibly invest. With such small amounts, the options are usually the following: High Interest Savings Account – Not really a growth account but at least you are putting your money aside and not spending it. The current interest rates don’t even keep up with inflation. I am not sure if they ever did … Guaranteed Investment Certificate (a.k.a. GIC) – The banks will often offer GIC when you have a small amount of money to invest outside a registered account. It pays more than a high interest savings account but it locks your money for a certain period. Interest is paid and is therefore treated as regular income if done in a non-registered account. Mutual Funds – Any accounts will let you invest in mutual funds. You can do it form your TFSA, RRSP, Non-Registered or even through the bank. Mutual funds allow you to invest very small amount at any kind of interval you want. It tracks fractional shares and it makes it very easy for anyone to invest in. I started with mutual funds but I am mostly in stocks now. If investing in mutual funds is appealing to you, I suggest you read about index investing. Canadian Couch Potato has a great site for index investors. These options tend to be what most of us are aware of when we are young. I wish I knew what I know know, as I know stock investing is well within reach when you are young. I thought it was too expensive but that was a myth.

Mythical Cost of Stock Investing

Stock Investing usually requires a discount broker account. I say usually because I’ll show you how you can invest in stocks without it.

Discount Broker – Transaction Fees

The standard way of buying stocks is through a broker, and if you are like me, you are using a discount broker. The cost of investing with a discount broker can vary but I’ll highlight some of the costs depending on your broker. $50 Free Trades & Chance to Win the Professional Trader Course

  • Trading Fees – It can range from $4.95 to $29,99. Questrade is by far the cheapest discount broker in Canada.
  • Account Fees – Some account will have a fee depending on your capital invested and who the broker is.

Before I saw the light and did my research, I thought I’d have to pay $29.99 to trade stocks and that’s a bit steep when you only invest under $1,000.00 dollars. It can add to the share price over time. Assume you have $500 to invest every few months and you want to buy a bank. For simple math, assume they trade at $50 per share. Your 500$ only allow you to buy 9 shares. We’ll raise your capital to cover the transaction fees to buy a total of 10 shares.

  • With a $29,99 fee, you would add $3.00 per share. That’s adding over 5% to your cost.
  • With a $4.95 fee, you would add $0.50 per share. That’s adding 1% to your cost. Not much but it’s the cost of a low mutual fund MER (Management Expense Ratio).

Add to this any account fees for the year if you have any due to low investment capital and it starts adding up. The power of dividend investing is the ability to DRIP shares and that’s very difficult to do with a discount broker account and little money as you need to purchase enough share to generate a dividend payment that is above the cost of one share. Usually, that’s well in the thousands of dollars.

Transfer Agents – No Transaction Fees

Computershare Holdings
Snapshot from 2009

I saw the light after reading Derek Foster’s The Lazy Investor. Through his book I discovered Computershare and Canadian Stock Transfer. They are transfer agents for corporation allowing you to buy shares directly and at no fees. So far, all Canadian companies I have purchased do not have fees but I believe some US corporations have fees (I have not purchased any US companies through transfer agents yet). As the book title says, you can start with only $50.00. The transfer agents allow you to purchase fractional shares and most companies available also pay dividends which makes it perfect for dividend investors. The initial setup could be expensive as you need a share certificate but I found a way to get a share certificate for the price of 10$ only. It beats the cost of any discount brokers! Requesting a share certificate from a discount broker requires you to buy a share plus pay for the certificate. You could end up paying 2 or 3 times the price of the share just to get setup. The cheaper way of doing it is having someone transfer a share in your name.

Dividend Snapshot
That’s where ‘The DRIP Investing Resource‘ comes into play. I bought all my first share of my 11 holdings with Computershare and CIBC Mellon through other dividend investors I found on the forums. For just 10$, as a thank you for doing the work, I got setup with all these amazing dividend friendly companies. I can DRIP and let my money work for me. Just to show you how small you can invest, I’ll show you my holdings with Computershare. My total account value with Computershare is just slightly above $7,000. As you can see, you can invest in solid Canadian dividend paying companies with little money. In fact, most of my contributions over the past year have been between $50.00 and $300.00. You get the benefits of fractional shares and re-invested dividends (DRIP). All of it at no cost. All you have to do is let your money work for you!

Readers: Are you investing with the Transfer Agents? How long have you been doing it?

37 Responses to "How To Start Dividend Investing With Little Money"

  1. Cool article, and yes it is definitely possible to start with little money. I use Scottrade, and it has a flat $7 fee per trade. I don’t think that’s bad, but of course I try to make sure all transactions are north of $1k to limit my costs and spread the average out.

  2. I didn’t actually know you could buy directly through the TA’s for the first share – thanks for the post! I use CIBC Mellon and ComputerShare for my DRIP’s & SPP’s with Canadian companies too, but I’ve used my iTrade account to purchase the first batch of shares in the past, and then purchased the share certificates from there.

    Your way is definitely much cheaper, as trades cost $19.99 (unless you’re trading frequently, in which case the cost decreases) and share certificates cost $75. The nice thing is that once your request the share certificate, iTrade passes everything along to the TA.

    Thanks for info – I’m using your method moving forward!

    1. The Passive Income Earner · Edit

      Hi Martin,

      The first share is transfered by another owner as opposed to be bought through the TA. You need to use the forums to find a person to transfer it. Sometimes they do group buy if there is enough interest but no one to do the transfer.

      1. Thank you so much for this article.
        Baby steps are very important and I wish there were more articles like this to cover them. So far all the blogs I found do not cover much details on how to get rolling with limited funds. If you know of any please post them!

        I am just getting into investing, in the process of opening Questrade account and this puts different light on how and where to start. I definitely want to explore this option in more details.

        You mention forums. Are there any forums in particular that you could recommend?

      2. The Passive Income Earner · Edit

        Thanks for the comments! I too wished there was more information on how to invest with little money. The Transfer Agents really open up opportunities as you can see. The companies are limited but with little money it should not be a show stopper.

        The forum I refer to can be access from the link below. I have more informations in my Resources section. It’s a very active forum all across Canada.

  3. Not the main point of the article, but another way for young people to start saving is through maximizing your employer’s income tax withholding, which you get back after filing your tax report. Only a few hundred dollars, no compounding during the year . . . but better than casually spending that $20 each payday at the local beerhall?

  4. Hi, thank you for your interesting post. I there is so much information on dividend investing, but not enough info on how to start.

    I really like the Transfer Agent option.

    My question is: If I find shares for sale on ‘The DRIP Investing Resources” (at 10$), do I buy the first share and then contact the Transfer Agent. Or is it the reverse, that is contact Transfer agent and then buy the share? Or neither?

    Thank you

    1. The Passive Income Earner · Edit

      Hi Karen,

      Thanks for your question! If you buy the first share on your own from a broker, then you need to receive a share certificate and then transfer it to the TA. However, if you use the boards where investors offer the first share, it’s all taken care of with the 10$ fee (plus the cost of the share on that day). You don’t have to do anything. The person transferring the share handles it all.

      Hope this helps!

  5. How much shares do you need in order for the drips to be effective … also if u collect dividends in ur TFSA, can you take them out TAX FREE…..

    1. TFSA withdrawals are all tax free thus the name TAX FREE SAVINGS ACCOUNT. You can never pay tax on a TFSA under any circumstance that you could dream up. It’s tax free. You could pay penalties for going over your limit, having unqualified investments inside the account ,contributing while a non-resident or receiving what tax law deems “an advantage”. But you could never pay tax. Ever. The penalties are absolutely harsh as hell when compared to any returns you might get so be sure to stay within the limits and read what investments are prohibited.

  6. Thanks for writing that!I am 25 and I am just think of making investments, and thanks to your post I have more useful and detailed information and now I know even if I have not a lot of money I still can make investments and start my retirement savings.I think it will be absolutely right and wise step because its’ never too early to take care about your future,especially if investing money to devident stocks you make money work for you.Most of young people like me do not have a lot of money to make investments, so it’s great to see that there are companies where I can invest with little money.

    1. Great your starting to consider this at your age. If you wanted to get started the easiest way, then set up a Discount Broker account and buy 15 shares of a company share that offers DRIP & SPP. Say the stock is $25 per share, times 15 = $375.00. Add $29 for trade and max $50 for certificate for total of $454.00. Divide by 15 equals $30.27 per share. Thats cheqper than one share at $25 plus $10 from Resource Centre.

      Set up account at Transfer Agent and send in certificate to start Drip & Spp. You may not need Share Certificate if you can do an In Kind transfer and save $50.00.

  7. Hey,
    I went to the website u suggested about buying one share, however, they are only American, where can you get one certificate of framing quality for the Toronto market?

    1. The Passive Income Earner · Edit


      Computershare and CanStock do represent Canadian companies for share purchase plans. However, to get a certificate, you either need someone to transfer a share in your name using one of the forums or to buy a share through a discount broker and have them send you a certificate.

      I have gotten all my shares through the forum and it worked well for all my first shares.

      Hope this helps!

  8. Hey,
    Thanks so much for your quickly reply. What message board do you suggest the DRIP forum? I went there and it didn’t look legit… Thoughts?

    Also on a side note, u may know, I am actually thinking of buying some certificates to actually frame, does it matter if I do it through one of those site or a discount broker ie. Itrade?

    Also do u know of any cool Canadian ceificates that you would recommended framing?

    1. The Passive Income Earner · Edit


      I never did frame anything but it can be something cool. It will cost you a bit to request a certificate from a discount broker.

      I used this site: through the share exchange. It worked out for me for 11 different companies. Obviously, it works on trust but considering everyone saves over $100 per certificate, it’s a major saving for anyone to want to keep.

  9. Hi! I’m just reading this post for the first time. I’m starting to get interested in dividend investing after reading about transfer agents on another money blog I keep up with… I haven’t tried to purchase any yet, as I’m still researching. I was under the impression taht if I wanted to enroll in, say, a Johnson and Johnson DRIP where the company pays all teh fees, I just need to do the minimum price/1 share initial investment? I wasn’t aware of the need for the certificate… if you could explain, i’d appreciate it. Also, what sort of information do I need to exchange with someone from one of these share transfer message boards? It seems like there’s a lot of potential for scamming, unless I’m missing something… Thanks!

    1. The Passive Income Earner · Edit

      There are chances for scamming but people ask if the person is reputable. It’s definitely a trust. I started with a small stock that cost $20 and figured it’s a little price to test it. Since then I bought 11 stocks through the board.

      As for a US stock, the process is different. I have not personally done it yet being that I am Canadian. The share certificate can cost quite a bit through a broker but if someone transfer a share in your name, it’s free.

      Hope this helps.

  10. Thanks for the clarification. So, I’ve been using my Vanguard account to buy stocks, and can do so for 7$ per trade. Could I buy one share through Vanguard and then use ComputerShare, for example, to transfer it to a Computershare account and enroll in the DRIP?

  11. Really interesting article. I want to get started, but need some clarification.
    I am curious about what kind of account this is applicable for.
    So my understanding is, buy a share, get a certificate, send to transfer agent, buy additional / set up DRIP with the transfer agent.

    My question is this, does the share get transferred to another account? or account type (registered/unregistered)?

    The example in my head is as follows.
    1)Open a TD waterhouse RRSP account. Buy a share, get a certificate.
    2)Send the certificate to Compushare.
    3)Set up DRIP and buy additional shares from Compushare.
    Are those shares still in the TD waterhouse RRSP? Or are they in an unregistered account? Or is there account type when setting up with Compushare?

    Thank you so much for the blog, makes me a little anxious about how I’ll have to decide how to invest for the next 30-40 years, but really interesting reads.

    1. Think I figured it out.. No, being the quick answer.

      For anyone else, the Transfer agent is another account. Unregistered. But it allows the OCP(SPP), fee-free share purchases. What seems to be normally done, is to DRIP/SPP enough to get full shares, transfer that amount (minus at least 1 share to keep getting fee-free shares) into an RRSP/TFSA, and synthetic DRIP there.

      So I think that first share, should be bought, in an unregistered account.

      Please correct me if I’m wrong. (or even if I’m right)

    2. I wouldn’t advise using a registered RRSP account with td waterhouse.
      Why? because you will be penalized for withdrawing your share.
      Once your order a certificate for the stock that you bought in your td waterhouse cdn cash account, it will be de-registered from TD Waterhouse and won’t be considered as part of your Td waterhouse portfolio.
      I would suggest that you buy one share in a simple canadian cash account with TD waterhouse and then order a certificate for that share, but it costs 57 bucks just for the certificate.
      Also be careful to check which drips are still operating.
      do an investment plan search on computershare’s website. it is very helpful.Also they have humans answering their phones at computershare and they can help you make sense of the process.
      you also want to select drips that aren’t designated as “depository only”.
      Once you have a stock certificate for a drip that computershare currently operates, you can mail it to them. Note that sometimes some companies don’t offer paper certificates any more, and they will electronically register your share at computershare. The fee is the same …..57 dollars.Then you need to fill in a form that request them to convert it into a drip.
      Best wishes.

  12. Hi Passive Income Earner.
    I am seeking out cheaper discount brokers with no penalties and without higher costs if I start out with a just a little bit of money in the trading account….such as under 500 bucks. Yes, I hear that questrade is good but do they charge higher commissions if your balance is low?

      1. Actually, they have an inactivity fee if your account has less than $5,000 since 2012. Here are the details.

        1. As of October 1st, 2012, an inactivity fee of $19.95 per quarter is charged to clients with under $5,000 in combined equity for any quarter in which the client does not complete one commissionable trade. Commissionable trades include free trades or trades made using commission rebates. Combined equity includes all accounts owned by a client, including joint accounts. Clients are exempt if they are 25 years of age or under, or are subscribed to a level 1 (or greater) data package. Charitable organizations are also exempt. If the client trades in the quarter after incurring an inactivity fee, the trades will be commission-free up to $19.95. For example, if a client incurs an inactivity fee on July 1st, any trades made in July, August or September will be commission-free up to $19.95.

  13. Is there a way to drip and purchase ssp through the tfsa without paying my brokerage fee to trade? I have an investors edge account with a fee of 6.95 per trade. I currently drip inside that account( synthetic drip?) Can I eliminate this by dripping and buying direct? How does it get put INSIDE my tfsa or am I stuck?

    1. @Irene

      In a brokerage account, DRIP is available with many discount broker but only for full share. So you need to have enough dividend to buy a share. SPP is not provided by discount broker as it usually is a company program and therefore managed by other companies such as Computershare or CST. The discount on DRIP is often offered in a discount broker account but you need to double check.

      To buy direct from the company, you need to do it through the transfer agent and you have to look on the company’s website to see if it’s offered. The rules are different per company but you will get an idea on how it works. has a lot of information on transfer agents and the processes.

      1. Thanks, I drip inside the investors edge but it sounds like I can’t do spp inside my tfsa in order to save brokerage fees. o well, it was a nice thought!

  14. I have been thinking of starting DRIP investing for a while now, but I can’t find any information if its possible to ‘start’ with a TFSA (or RRSP ) account OR DRIPs can only be done with an Unregistered account ?


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