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How to set up the Dividend Reinvestment Plan (DRP)

August 6, 2019 By ETF Bloke 11 Comments

After you purchase an ETF you will receive a welcome letter in the mail.

Do not ignore this letter!

If you plan on registering for the Vanguard Dividend Reinvestment Plan (or Betashares, or Blackrock – whichever company is offering the ETF you just bought!) you need to follow the steps in the welcome letter. Below is what the Vanguard welcome letter looks like:

The welcome letter with the Vanguard Dividend Reinvestment instructions that is mailed to you

The first of these steps is to register your holdings at the share registry.

What is a share registry?

Some people are confused by exactly what a share registry is and what it is used for.

To make it clear I will give an example using something that people are more familiar with – buying a car!

When you buy a car you buy it from a marketplace.

Now the marketplace where you buy the car may be the BMW dealership, it might be Car City, or you might buy from Shane off Gumtree.

Once you own the car the place that you bought it from has no further interest in you. The marketplace’s role in your purchase of the car is finished. But your personal responsibilities regarding the car are not.

What do you have to do after buying a car?

You need to register it.

The places where you can register your car differ by state. Your car registration is held with VicRoads if you live in Victoria, or the Department of Transport & Main Roads if you live in QLD etc.

Wherever you live, these departments play the role of the Car Registry for that particular state.

Your address and contact details are registered with the car registry. And this is how the coppers know where to send you fines when you are caught doing 53km/h in a 50 zone.

Your details are not registered with the place where you bought the car. The marketplace has no interest in you once the car has been sold.

The process is the same when buying shares, you need to register your share holdings with a share registry.

When you buy shares, you also buy them through a marketplace.

With shares the marketplace where transactions take place is called a broker. Examples of brokers are Commsec or NABTrade.

After you have bought shares you need to register your ownership of these shares at the share registry, just as you would register your car at the car registry.

The share registry is the place that holds your address and contact details. This is how the company or ETF that you own shares in knows how to communicate with you.

Now on to how to register your shares with a share registry.

Register your ETF shares at the share registry

There are several share registries that public companies can use in Australia. The two leading share registries are:

  • Computershare
  • Link Market Services

For all you Vanguard buyers, the Vanguard share registry is Computershare. You will need to log in to the Computershare registry to enroll in the Vanguard Dividend Reinvestment Plan (DRP).

If you aren’t sure which registry the company you own is using, just wait until you receive the welcome letter. This will tell you which share registry to use.

After you have purchased your ETF go ahead and follow the instructions in your welcome letter to register an account with the relevant share registry.

During registration the share registry is going to want you to provide some additional information regarding your share holdings:

Your payment instructions

This is where you give the details of the bank account where you want any dividends you receive to be deposited. If you don’t want to receive your dividends in your bank account and would prefer to participate in the dividend reinvestment plan, this preference is communicated after you have registered.

Your security holder communication elections

Here you let the share registry know your email address so that you can receive company communications electronically. Alternatively you can choose to receive this information at your mailing address.

Your Tax File Number/Australian Business Number

If you are an Australian Resident it is in your interest to provide your TFN. This is so that the correct withholding tax is applied based on your residency status.

If you do not provide an Australian Tax File Number then your share holdings and any income earned from them will be taxed as if you were a non-resident of Australia (read: taxed very highly!)

Ok now you are registered with the share registry lets look at how to enroll in the dividend reinvestment plan.

Set up the Dividend Reinvestment Plan (DRP)

In this example I will walk through registering for a DRP on Computershare.

The option to register isn’t as obvious as you might think it would be so I will use a few screenshots to show you the way.

First, log in to Computershare

Then go ahead and click on My Portfolio over on the right hand side:

Choose My Profile in Computershare

Select the Reinvestment Plans option:

Choose the Reinvestment Plans Update option

Select the share holding that you want to set up the dividend reinvestment plan for:

Select the share holding that you want to enroll in the dividend reinvestment plan

Then choose Amend from the Select Action drop down box:

Select Amend to change your dividend reinvestment plan

On this screen you can choose your participation level. Select Full Participation to enroll in the Dividend Reinvestment Plan:

Select Full Participation to set up the dividend reinvestment plan for that ETF

After clicking next a couple of times you are now enrolled in the dividend reinvestment plan!

You may receive a letter in the mail confirming your change in reinvestment plan option.

Now the next time that your ETF shares issue a dividend, rather than paying out a cash dividend the company will buy more shares for you at no cost!

Did you find this walkthrough helpful? Is there another ETF process that you need help in understanding?

Let me know using the Contact page

Filed Under: ETF Investing

Reader Interactions

Comments

  1. Jairus Knight says

    October 18, 2019 at 5:35 am

    Thanks for the handy guide

    Reply
    • ETF Bloke says

      October 22, 2019 at 4:44 pm

      No worries Jairus – glad you found it helpful!

      Reply
  2. Shaun says

    November 5, 2019 at 7:17 am

    Exactly what I was looking for Vanguard where pretty vague on how to do this when I asked. Most they gave me was call Computershare. Much appreciated.

    Reply
  3. Maryam says

    November 26, 2019 at 4:08 am

    This helped me a lot! Thank you! Not sure why the DRP enrolment wasn’t obvious to find on Computershare…

    Reply
  4. Alex says

    January 10, 2020 at 5:48 am

    Excellent walkthrough to set the things right for someone like me who is new with both Vanguard and Computershare. Thanks!

    Reply
  5. Ragnar says

    January 24, 2020 at 2:24 am

    Awesome. Great walk-through. Didn’t even know about the registry! Exactly what I was looking for.

    Reply
  6. ken tran says

    March 31, 2020 at 9:50 am

    Thank you so much for this!!! This is such a helpful step by step guide to reinvest your dividends. Muchly appreciated Sir 🙂

    Reply
  7. ASh says

    March 31, 2020 at 12:28 pm

    Great work in sharing this info- wonderful for a first timer ! Two Thumbs up !

    Reply
  8. Jennifer says

    May 9, 2020 at 12:31 am

    This is really fantastic. Thank you so much. The car dealership explain was simple and easy to follow!

    Reply
  9. Nick says

    June 22, 2020 at 5:33 am

    Excellent explanation always! Thank you for your thoughtful article

    Reply
  10. Jen says

    January 19, 2022 at 9:46 am

    I finally took the plunge and bought some VAS ETF on SW. However I didnt receive anything from Computershare and when I tried to register on their website, it says that they couldn’t find me on their database.

    How long did you wait before you receive your introductory letter? Looking for people to share their experience.

    Reply

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Information provided by ETF Bloke is general in nature and does not take into consideration your personal financial situation. It is for educational purposes only and does not constitute formal financial advice. Remember, the value of any investment can go down as well as up. Before acting, you should consider seeking independent personal financial advice that is tailored to your needs.

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