TD Ameritrade Ends Scottrade Flexible Dividend Reinvestment Plan
TD Ameritrade Management Corp.
plans to drop a flexible dividend reinvestment program used by some Scottrade clients and move them to its more traditional program.
The online brokerage, which acquired Scottrade Financial Services Inc. in September, intends to transfer clients currently in Scottrade’s flexible reinvestment program to its dividend reinvestment program in the first quarter of 2018, said a spokesperson for TD Ameritrade. “We have a comprehensive customer communication plan ready to help customers through the process, which we hope will be transparent,” she said.
About 5% of Scottrade’s accounts receivable use the program, she said, although she does not have the number of accounts receivable it represents.
Scottrade’s program allows investors to reinvest dividends from one security in potentially thousands of other securities. Most stocks, exchange-traded funds, U.S. certificates of deposit, master limited partnerships and real estate investment trusts are eligible for purchase in the program, according to the Scottrade website. Investors can choose up to five stocks at a time to reinvest their pooled dividends in and can change that list at any time, he says.
In a traditional dividend reinvestment program, like that of TD Ameritrade and many other brokerages, all dividends received are invested in the shares of the company that paid the dividends.
The TD Ameritrade spokesperson said the company has found that a majority of customers using the Scottrade program are using features available in the TD Ameritrade program. All features of Scottrade’s Flexible Reinvestment Program that are not currently available in the TD Ameritrade program will be incorporated into the program on time, she said, although they may not be available on the day clients of Scottrade will be transferred. The improvements will take place in the months following the first quarter conversion of Scotttrade’s accounts receivable, she said.
“While DRIP does not currently offer the flexibility in security choices that FRIP has, there are a number of other benefits that we believe will benefit clients,” she said. .
The TD Ameritrade program allows investors to buy fractional shares, but the Scottrade plan does not. And mutual funds cannot be purchased through the Scottrade program, but can be purchased through TD Ameritrade’s program, she said. Dividends reinvested under the Scottrade and TD Ameritrade programs are considered taxable income. Dividend reinvestments in both programs are commission-free.
Scottrade and TD Amertrade will operate as separate companies until early next year, TD Amertirade said on its online Scottrade Transition Hub.
Write to Daisy Maxey at [email protected]
Corrections and amplifications
Dividends reinvested under the Scottrade and TD Ameritrade programs are considered taxable income. An earlier version of this article incorrectly stated that dividends reinvested under the TD Ameritrade program were only taxed upon the sale of a security. (October 9, 2017)
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