Imagine for a moment that Joe Canadian purchases shares in Encana (TSX: ECA) on the Toronto Stock Exchange. Joe holds the stock in the CAD side of a taxable investment account. It so happens that Encana, like many other Canadian resource companies pays dividends in US dollars. When Joe receives Encana dividends in his account, his broker will charge a hefty foreign exchange conversion fee and deposit Canadian dollars into Joe’s investment account.
The disclosure of exchange fees charged on dividends received in a currency that is different from that of the holding account leaves much to be desired. TD Waterhouse, for instance, adds the note “CONVERT TO CAD @ x.xxx” to such dividend payments in the activity screen but if you look at the monthly brokerage statement, there is no indication that dividends were converted and foreign exchange fees charged. Therefore, Joe might remain blissfully unaware that a foreign conversion fee is being charged on dividends that he receives.
Fortunately, Joe can take some steps to avoid at least some of the foreign exchange fees on his dividend payments. If a Canadian stock pays dividends in US dollars, Joe can contact his broker and request the shares be journaled to the USD side of the account. Dividends received after the shares are journaled will remain as US dollars and will be credited to the USD investment account. The reverse is also true. If a stock purchased on an US exchange pays dividends in Canadian dollars (Canadian banks are a good example), Joe can avoid currency conversions by journaling the shares to the CAD side of the account. If Joe holds all his accounts at a brokers who is able to segregate CAD and USD holdings in registered accounts such as RRSPs and TFSAs, Joe may be able to avoid these forced foreign exchange conversions altogether.
The TSX website is good place to check the currency of the dividend payments. The following Canadian stocks pay dividends in US dollars (the list is courtesy of a Canadian Money Forum member):
Agrium Inc. (AGU)
Barrick Gold Corp. (ABX)
Brookfield Asset Management Inc. (BAM.A)
Brookfield Infrastructure Partners LP (BIP.UN)
Brookfield Office Properties Inc. (BPO)
Brookfield Renewable Energy Partners LP (BEP.UN)
Constellation Software Inc. (CSU)
Encana Corp. (ECA)
Goldcorp Inc. (G)
IAMGOLD Corp. (IMG)
Inmet Mining Corp. (IMN)
Kinross Gold Corp. (K)
Magna International Inc. (MG)
Methanex Corp. (MX)
Open Text Corp. (OTC)
Potash Corp. of Saskatchewan (POT)
Silver Wheaton Corp. (SLW)
Talisman Energy Inc. (TLM)
Thomson Reuters Corp. (TRI)
WaterFurnace Renewable Energy Inc. (WFI)
Yamana Gold Inc. (YRI)
