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Beginners Guide to Stock Gifting in Canada

When we think to gift someone, numerous options such as stationery items, clothing items, or some antique pieces top the list. But have you ever thought of gifting a stock? Yes, that’s possible. And trust me, that would be the best value gift someone could ever receive. Giving the gift of stock has benefits for both the giver and the receiver. The giver avoids paying taxes on the gain and the receiver benefits from any gains in the stock’s price. There are multiple ways to stock gifting in Canada, but let’s first dive into the basics of Stocks and Investing.

Read: How to Buy Stocks in Canada: The Ultimate Beginner’s Guide

Let’s Look First at the Stocks Types

Dividend Stocks

One thing you can be certain about the dividend stock companies is the cash flow you receive as dividends from them. Dividend stock companies are well established for a reason that they are consistent in paying some distributions as a % of their earnings and because their earnings are not volatile. 

These distributions are called dividends. It can take the form of cash or additional stock. The frequency of these dividends is generally on a quarterly basis, but not restricted if they are to be paid our monthly, annually, or one-time special dividend. While dividend stocks are known for consistency of their dividend payments, in times of crisis shareholders might not receive dividends as the company might save cash.

Read: All-in-One ETF in Canada, You Can’t Ignore It At All! 

Growth Stocks

As good as it sounds, a company’s share is projected to achieve growth at a particular rate that is above the long-term average growth rate of the market. You don’t get to enjoy the perks of receiving dividends in these kinds of stocks. 

Management of these companies has a vision for growth, where they tend to reinvest the earnings to explore any opportunity and create wealth for their shareholders. An investor investing in these stocks aims to have capital appreciation. They want to book profits by selling their shares at a higher price in the future.

Value Investing Stocks

The word value investing is synonymous with Warren Buffet and Benjamin Graham. The latter is also known as the father of value investing. It’s a well-known strategy of investing in those stocks of the companies whose price is below the intrinsic value. Every investor has their own perspective of valuing a stock, but value investors believe in the stocks that are undervalued or the market has not recognized their true worth. 

The major factor they look into is the fundamentals of the company, which might not be in place as per the current share price. Markets sometimes overreact to the short-term news and that gives the opportunity to value investors to buy stocks at a bargain price. Other people who fit in this category are David Dodd, Seth Klarman, Christopher Browne.

Read: Guide to Investing in Mutual Funds in Canada

Understanding Stock Gifting in Canada

Now that we have basic knowledge of what was needed, let’s jump to our topic of the day of – stock gifting in Canada. Gifting stocks is not only about a gesture, but also raising awareness about the stock market, company, and the overall industry and economics. 

You can gift stocks from your current investment portfolio to the receiver with the help of a broker. Not only to adults, but you can also gift shares to children and give them the opportunity to learn about investing, money management, and patience. 

One thing to note is that the shares you chose to gift – if there is capital gains tax to be levied then it will transfer to the receiver. Recipients have to pay taxes on profits they will make when they sell those shares. Taxes, if any, will be calculated based on the difference between the price at which the shares are purchased and the selling price. Taking the help of tax professionals for near-term or long-term gains is beneficial. Let’s look at some ways to transfer stocks.

Read: Beginners’ Guide to RRSP Investments in Canada

Transferring a Stock Certificate

This comes when stock is in certificate form instead of electronic form. If the stock is held in the certificate, the procedure to be followed is slightly different. The person transferring the stock must validate it (stock in subject) in the existence of concerned stakeholders. 

Additionally, a form at the backside of the certificate alludes to how the ownership will be transferred. Post this process, the stock certificate is deemed complete and becomes an asset of the recipient.

Read: What Are The Investment Risks You Need To Know In Canada?

Gifting Through a Broker

This is the opposite of what we talked about above. The stock won’t be in a physical certificate form but instead, is held in an electronic form with some broker. The investor can also gift the full or part of the stock. 

Many brokers give you the lee-way to transfer the shares at regularly occurring intervals. For instance, if you wish to gift shares to your loved ones every birthday then you and the broker can come to a consensus with all the arrangements, and voila your gift will be delivered.

One thing to take note of is you will need to go through the process of authorization if you are the one gifting the stock with categorically alluding to how the transfer should take place. An online application with the broker will be present that needs to be completed in order to facilitate the transfer. Below information has to be included:

Sender Information

  1. Account number
  2. No. of shares and the company name will be required in the stock description
  3. Account name and address

Recipient Information

  1. Account number
  2. Account name
  3. SSN

Transferring the shares within the same brokerage firm should be simple and without any hassle. However, if the same exercise is to be done with other brokerage firms, the sender needs to contact the brokerage firm that would be receiving shares for the procedure of the transfer. The receiving brokerage firm’s address is where the instructions to transfer the shares electronically need to be sent.

One thing the sender needs to be cautious about is that there is an account at the receiving end and it is active, before transferring the shares.

Read: 22 Finance Terms You Should Know in 2022!

Gift, As Low As a Single Share

Yes, you read it right! You can also gift a single share of any company’s stock to let your friends or family start their investing journey. It can give them a head start to know about stock markets.

Shares can also be gifted based on a person’s liking or interests. Tailoring it to hobbies can be an efficient way of gifting stocks. For instance, you can gift shares of Sony or Nintendo to a person interested in playing games. Likewise, gifting shares of Disney to children can be an exciting endeavor for them and a way to let them know they invest in what they see.

All that said, you need to be cautious about the charges or fees the company might charge for a single share purchase for stock gifting in Canada.

Read: A Comprehensive List Of Best Robo Advisors In Canada!


Devanshee Dave

Devanshee is a staff writer at YourFirst.ca. She is a finance enthusiast and has completed her Master’s degree in Mass Communication & Journalism. She has worked as a journalist in a local business newspaper, multiple start-ups as well as finance and economy-related online media houses.

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