Recently, Tim Hortons (TSX: THI) announced that it is offering shareholders a Dividend Reinvestment and Optional Cash Purchase Plan (I found this out through the Canadian DRIP Primer). In the press release accompanying the announcement, Tim Hortons said that the Plan allows shareholders to purchase shares in “an economical and convenient way”. The Tim Hortons DRIP and SPP may be a convenient way to accumulate shares but it is a joke to call it economical. Here are some of the fees shareholders will be charged to participate:
Enrollment Fee: $8.25
Reinvestment of Dividends: 5% of amount reinvested, up to a maximum of $3.00 plus $0.03 per share purchased.
Optional Cash Payment (via cheque or one time online bank debit): $5.00 per transaction plus $0.03 per share purchased.
Optional Cash Payment (via Pre-authorized Debit): $2.50 per transaction plus $0.03 per share purchased.
Sale of Shares: $15.00 per transaction plus $0.12 per share sold.
DRIP investors are the type of investors a company should be looking for: long-term, buy-and-hold investors who behave as part-owners of a business. Many companies offer a discount to shareholders participating in their DRIPs but Tim Hortons is instead choosing to ding them with a 5 percent premium. A $5.00 fee on optional share purchases defeats the purpose of a SPP, which is to offer a low-cost way for small investors to accumulate shares. Tim Hortons should wake up and smell the coffee: you can’t pretend to be shareholder friendly by offering a DRIP and then sock participants with steep fees at the same time.