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How to DRIP Husky Energy (HSE)

husky-energy-logoBack in March I purchased shares of Husky Energy (HSE), and wrote a detailed post on my reasons for buying this diversified oil and gas producer. Husky has also been one of my stock picks for the Dividend Growth Index.  With its generous dividend yield of 4.9%, low payout ratio of 50%, and low debt levels, it’s no wonder investors are interested in the company.

Since that post, I’ve received a few emails from readers who are confused how to DRIP their shares. The confusion arises once the trade for HSE settles, and investors phone their broker and ask to have their shares of Husky enrolled in the DRIP (Dividend Reinvestment Plan). Husky (HSE) cannot be enrolled in the DRIP with the broker. So if you phone up your broker and say enrol me in the DRIP for Husky, they will tell you that Husky is not part of the DRIP program.

Corporate Action Notice

Each quarter on behalf of Husky, my broker TD Waterhouse mails out a Corporate Action Notice. This notice is called a Voluntary – Optional Stock Dividend, and is sent out approximately 6-weeks prior to the ex-dividend date. I’m certain other discount brokers also send out the exact same notice.

In the notice I am given two options. Option 1: Cash and Option 2: Stock. The default option is to receive my dividend as cash. In other words if I do nothing, I will receive the dividend as cash. In order to receive additional common shares, or DRIP the dividend, I simply phone TD Waterhouse and request the stock option. Voila!

Synthetic versus Full DRIP

It is important to understand that discount brokers only offer Synthetic DRIPs and not Full Drips. Full Drips are offered by transfer agents such as Computershare, where partial shares can be reinvested from the entire dividend. For a Synthetic DRIP your broker will only purchase full shares from your dividend. In other words you must own enough shares (83 shares x .30 dividend = $24.90) of Husky Energy to be able to purchase at least one share from the dividend. Of course if you have an even lot of 100 shares, which is a $30 dividend, then there is no problem. The remainder of the dividend is paid to you as cash in your account.

Why Is Husky Not Enrolled?

It would be far easier for investors if Husky Energy was simply enrolled in the DRIP program. I have no idea why they wouldn’t want to, since the discount broker would handle all the DRIP management. Perhaps that is simply not cost effective for Husky. There is also the consideration of whether a company chooses to dilute its shares for dividends, or prefers to pay out cash to shareholders. I had sent an email to Husky investor relations, to ask them why they are not enrolled for DRIPs with discount brokers, but received no reply.

Readers, do you have other stocks that cannot be enrolled for Synthetic DRIPs? Do you own and DRIP Husky?

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31 Responses to "How to DRIP Husky Energy (HSE)"

  1. Interesting. I have not done anything specific about HSE to have the dividends re-invested. Since I just changed discount broker, I will need to wait for the div to come in to see how it’s handled. I assume that since I asked for synthetic DRIP that it will simply do that for me :)

    • PIE I’m guessing each broker handles it differently. But since three readers have asked me now, and I have to confirm my DRIP with TD Waterhouse, I’m guessing it’s not the usual thing for Husky shares. ;)

      Cheers

  2. Amanda says:

    “With its generous dividend yield of 4.9%, low payout ratio of 50%, and low debt levels, it’s no wonder investors are interested in the company.”

    Thanks Ninja. I am interested now :)

  3. Geodelover says:

    Swear to God, I got out of bed this morning both thinking about buying some Husky (today is payday) and looking into figuring out how to DRIP my existing stocks and then I go onto DN and a brand new article mentioning both is there, bizarre…..

    • Geodelover, for 99.9% of stocks out there, you just phone your broker and ask them to DRIP your stocks (synthetic DRIP). Husky is the only stock in my portfolio I receive a letter that I have to followup with the broker each time.

      Cheers

  4. Nice, I will have to look at them. I use buyandhold.com for all my dividend stocks. Very low fees and they automatically reinvest your dividends, even partial shares.

  5. Rob says:

    Hi Ninja,

    Thanks for the information on Husky. I’ve been considering a buy for a while now but have been holding off because, honestly, I’m still new and a bit of a full DRIP-only freak. Most of my initial purchases were on the smaller side, registered and then DRIP through a transfer agent, so I didn’t want to buy a position with Husky until I could buy enough to synthetic-drip 1 full share.

    If they aren’t going to participate in the DRIP program at least these letters are coming out from the brokerage(s) to make it easy to synthetic DRIP.

    Did they give you any option to “opt in” for every quarterly dividend going forward, rather than having to call in and confirm the drip each time? I think that would be a great idea, as I can see these letters every 3 months starting to annoy investors… Maybe that’s just me though. If it’s the cost of DRIPING Husky, such is life. :)

    • Rob, thanx for dropping by! My other stocks are setup as automatic DRIPs, I just buy and hold and let the dividednds roll in. :) It’s only Husky that has this peculiar letter every quarter for dividends. But your right it would be nicer if I could just tell TDW to automically do this every time….

      I’m glad you like Full DRIPs, but I have not the patience for the slow haul. I found Computershare very difficult to work with, hard to get any updated information, and became qucikly frustrated with the whole process. In my case I just decided purchasing 50 or 100 shares at a time was much easier for me. But DRIPs certainly are a no-fee and great way to build up your portfolio over the long run – especially if you get the discount as well!

      Cheers

      • Geodelover says:

        Thanks DN. I agree. Webbroker needs a DRIP toggle button for when you buy shares.

        • Hey, I actually proposed that to a higher-up at TDW, they liked the idea. ;) I know that a couple of the brokers in the U.S. have that already setup. But I don’t think it would help much with the Husky DRIP.

          Cheers

          • JPR says:

            Thanks DN. Been doing the TDW phone call for Husky option 2 for a while now. I wish stock purchase was the default option.

            With TDW, you can tell them, on an account basis (eg. your TFSA account), to automatically enrol you in DRIP for any new share purchases. Once you do this, if you buy a new holding that has a DRIP, you do not need to call them to enrol in synthetic DRIP, it is done automatically.

            Hope that helps.

  6. Good post my friend.

    Like you, I’m trying to get as many stocks on autopilot (DRIPping synthetically), but HSE is one I need to “phone in” my DRIP. Not a big deal, but with low(er) HSE prices, I need to make sure I make the call to get HSE cheaper than before :)

    On another topic…are you still DRIPping with Computershare?

  7. Hey DN, just a quick question – what is the difference between Husky not being in the DRIP program and it being not?

    I understand there’s the extra step of you having to phone your broker and tell them to opt for the stock option AND you must have enough shares for the dividend payment to cover the purchase of one or more shares – but is there any other differences?

    I understand that one of the major advantages of reinvestment program that it is tax-free. All of your dividend payouts go into purchasing more shares. Does that apply to your reinvestment strategy with Huskey that’s NOT a part of the DRIP? Or are are your dividends subject to tax before you can look to buy more shares?

    • Janith, two different points here…

      1. Since your not a Canadian investor, HSE will be considered foreign content, as Husky is a Canadian company. I’m not familiar with Australian investment plans, but if its in some type of registered plan the dividends should be tax-free, else it will be deemed foreign content. It really depends on Australian tax law, which I have no idea about. ;)

      2. That said, I can DRIP U.S.stocks and foreign stocks if I wanted to, and so should you. Again it depends on Australian tax laws whether you will be taxed on those dividends or not.

      3. Husky is a bit of an exception, but not for everyone it appears. Most stocks are easy to DRIP.

      Hope that helps.

      Cheers

  8. LakeviewG says:

    Good to know about Husky. One stock I have that unfortunately cannot be dripped is Brookfield Infrastructure (bip.un). I too use TD Waterhouse and have my RRSP and TFSA accounts setup to auto drip any stocks that have this available.

    But because Bip.Un corporate office is in the Bahamas instead of Canada or the US , TD advised they can not drip the stock. (Bip) does have a drip program and a 5% discount on stock purchased so it is too bad TD can’t drip the dividends. It has been a great purchase for my account with the stock appreciation since Jan 2010 and the dividends. But would be that much better with the ability to drip.

    • Carla says:

      Below is the contact info for BIP.UN’s transfer agent. Perhaps they will have a drip program that you can enroll in similar to computershare or cibcmellon…….

      Transfer Agent

      For enquiries regarding unit transfers, changes of address, distribution cheques and lost unit certificates, please contact:

      BNY Shareowner Services
      480 Washington Boulevard
      Jersey City, NJ 07310
      Toll-Free: 877-243-3717
      http://www.bnymellon.com//shareowner/isd

  9. Joe says:

    I too invested in HSE with TD. I received TD’s Corporate Notice regarding HSE Voluntary – Optional Stock Dividend options in July. I called TD and requested the stock option and everything is fine. However, I noticed I have HSE dividend paid out yesterday (Oct 1/2012) but no stock was purchased with the new dividend payout. I called TD and they told me that I will received the TD’s Corporate Notice again and I have to call and acknowledge the stock option every time – not good. I would like to know other HSE investors experience.

    • Joe, yes you have to phone TDW (or mail the notice) each quarter. It would be ideal if Husky would simply enrol with TD for the DRIP, but for whatever reason they don’t..

      I’m willing to take the 5-10 minutes to phone, because Husky is a great company with a great yield. I view this is a minor inconvience I incur to invest in the company. ;)

      Cheers

      • gibor says:

        Ninja, I like and hold Husky like yourself… Today I was surprised to see
        Goldman’s downgrade HSE to ‘Sell’.
        From my research HSE has a big insider buying and no selling. Fundamentals looks good.
        Thompson Reuters gives HSE the highest ranking: “HSE is currently among an exclusive group of 75 stocks awarded our highest average score of 10.”
        What is your opinion on this downgrade?

  10. gibor says:

    Ninja, Today I was surprised to see
    Goldman’s downgrade HSE to ‘Sell’.
    From my research HSE has a big insider buying and no selling. Fundamentals looks good.
    Thompson Reuters gives HSE the highest ranking: “HSE is currently among an exclusive group of 75 stocks awarded our highest average score of 10.”
    What is your opinion on this downgrade?

    • Gibor, I don’t really pay attention to analysts upgrades or downgrades to be honest. I do as much research on a company as possible, make my decision and leave it be. I don’t really see what the potential problems for Husky could be, except for macro-economic conditions – unless GS has insider information. For now I’m happy to leave my position in HSE as is. ;)

      Cheers
      The Dividend Ninja

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