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)

This article has 36 comments

  1. Good list! Another small company which does the same – WaterFurnace Renewable Energy (TSX: WFI).

  2. Good post CC.

    This might be a topic for another post, but are you aware of which online discount brokerages meet the criteria of being: “brokers who [are] able to segregate CAD and USD holdings in registered accounts such as RRSPs and TFSAs”?

  3. Trying to stay ahead of this sounds like a pain even at a discount broker like BMO Investorline that allows customers to split their accounts. Each time you buy a particular stock in CAD, you have to call them to get it moved to the US side.

    An even bigger issue is all the US-denominated shares in RRSPs that continue to sit in the Canadian half because customers don’t understand the issue. I’d be happy if I could instruct BMO to never convert currencies unless I explicitly ask for it.

  4. @CanadianInvestor: Thanks Jean. I’ve added WFI to the list.

    @Returns Reaper: Among the big brokers, RBC Direct Investing & BMO InvestorLine allow you to keep USD and CAD segregated in all registered accounts except RESPs.

    @Michael James: I agree with your take. It would be nice if brokers could make this automatic but I don’t think there will be much movement unless clients make some noise. The forced currency conversion is a nice profit centre that brokers will be loathe to make changes without some push.

  5. My head is spinning about the trade-offs between forced currency conversion and tax efficiency.
    1) If I own a Canadian company (say Encana)that is inter-listed and that pays dividends in US dollars to a US account – are the dividends still eligible for the Canadian dividend tax credit?

    According to Encana’s website: http://www.encana.com/investors/shareholder/dividends.html
    “Canadian Addresses Dividends payable to shareholders (including individuals or intermediary accounts) with a “registered” address in Canada shall be converted into and paid in Canadian funds at the rate quoted for Canadian funds by the Bank of Canada at noon on the Record Date.| In addition, “all dividends paid on its common shares will be designated as “eligible dividends” for Canadian income tax purposes. This designation will apply until a notification of a change is posted on this website.”
    To me, this sounds like even if I hold Encana in a US$ account, the dividends would be converted to C$ and eligible. However, wouldn’t my broker then have to convert the dividends back to US$? If that’s the case, there is no advantage and a Canadian should generally hold Encana in a C$ non-registered account.

    2) Where should someone hold the Brookfield subsiduaries (Infrastructure/Energy) to minimize currency conversion costs and to maximize tax efficiency?

  6. is it true that brokers or at least one broker is supplying currency conversion figures in temporary activity or transaction screen but not on statement ?

    i’m unable to see for myself because all my stocks are in the correct accounts according to currency of the dividend … ie no FX conversions … er, sorry … not trying to be smug …

    i don’t see how brokers could ever separate stocks on this basis for clients. The picture keeps changing, although gradually. A few at a time, canadian multinationals are switching to paying their dividends in USD. Talisman is the most recent that i know of. I’d imagine that a lot of their decision to do so rests upon the wishes of their largest shareholders, when these are american.

    where i do fault the brokers is that their licensed representatives are not trained to handle this issue, so quite often one finds the reps denying what is happening. The dividend is paid in both currencies, the reps will say. There is no conversion & there is no FX fee, the reps will say.

    this is not any kind of effort to mislead imho. It’s just that the issue is complex & the reps don’t know any better.

    (to piker):

    Q: will canadian stock held in US account in order to receive USD dividend without FX fees still be eligible for full canadian dividend tax credits ?
    A: yes

    Q: will such stock be subject to US withholding tax ?
    A: no

  7. Hi CC,

    I have double checked CNQ in my TDWH account as well as on TSX web site. It pays dividend in Canadian, not US.

    Excellent artcile btw, really really helpful.

  8. The TMX web site agrees with Peter than CNQ pays dividends in CAD.

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  10. CC great post, and resource! I’ve had a couple of readers ask me about this, and didn’t have an answer. Is there an underlying reason why these Canadian companies would pay their dividends in U.S. dollars?

    Cheers
    The Dividend Ninja

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  12. Great list CC!! I don’t own any of the companies on the list right now, but this is good to know.

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  15. Amongst these stocks paying dividends in $US, there are those which also pay dividends in $CDN.

  16. Well, it should be interesting post and thanks to canadian capitalist for share a great post about how to manage Canadian stocks paying $USD dividends.

  17. @Harry: A stock will pay its dividend either in CAD or USD. If you hold one of the stocks in this list and you received CAD, it may be because your broker converted the currency before depositing the proceeds in your account.

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  19. hello on 13 september/2013

    nice-looking new format for Canadian Capitalist, felicitations!

    i don’t know if i’m writing to myself, alone in a void on this late date, but i’d like to mention that canadian stock Silver Wheaton (SLW) is another that pays its dividend in USD. It should be added to the quasi-official list in above article if at all possible.

    a number of the companies on that list do pay their dividends in USD only but they have confusing information on their websites. Often, their website dividend info is directed to their registered shareholders only – ie shareholders who are holding share certificates registered in their personal names.

    these shareholders are in the minority now. By far the vast majority of shareholders hold shares at brokers in street or nominee form. It is the broker, therefore, that controls the dividend uptake & gets first chance at imposing its FX fee on the dividend stream.

    returning to the companies’ policies with their registered (certificate-holding) shareholders, sometimes the USD-paying companies do allow a choice of currency. The procedure for changing the currency is complicated. But on the record day of a dividend, such companies will issue a physical cheque, printed on paper, in the currency of the shareholder’s choice.

    the majority of shareholders holding shares in street at brokers do not have this choice. They have to manually make sure that their broker is holding such shares – the potash, the barricks, the magnas, etc – on the USD side of the account.

    if it is a registered account at a broker that does not offer USD registered accounts, such shareholders are out of luck.

  20. a related issue that has never yet been explored is the DRIP programs for these 19 interlisted canadian companies.

    not all of the 19 have DRIPs, of course. I only checked one example but it has a screaming red flag. The Potash DRIP is administered in the US, in US dollars. In new york city, i believe.

    i had occasion to speak to a responsible, experienced supervisor for the POT DRIP program. Yes, he said, it’s 100% administered in US dollars.

    what about investors buying additional POT shares with new monies that they offer in canadian dollars under the DRIP? i asked. Who is harvesting the FX fee here?

    new york city laughed gently, agreeably. Fact was, neither of us could exactly spot the point at which some institution would pounce like a cougar with its FX fee. But it did look like it would be the broker.

    just like the butler in the classic murder mystery, the broker done it …

    • Canadian Capitalist

      @humble_pie: Thanks for pointing out SLW pays in US Dollars. I’ve added it to the list. I agree with you that it is likely the broker who is enjoying the FX fees on DRIP purchases.

  21. struggling as i do to stay on top of messy investments & having created this list in the first place, the addition of SLW at the bottom was somehow rubbing my neat-mindedness the wrong way.

    originally, i had grouped the companies by sector, starting with energy.

    but now, i think a plain alpha-by-company list is better.

    like so:

    Agrium Inc. (AGU)
    Barrick Gold Corp. (ABX)
    Brookfield Office Properties Inc. (BPO)
    Brookfield Asset Management Inc. (BAM.A)
    Brookfield Infrastructure Partners LP (BIP.UN)
    Brookfield Renewable Energy Partners LP (BEP.UN)
    Encana Corp. (ECA)
    Goldcorp Inc. (G)
    IAMGOLD Corp. (IMG)
    Inmet Mining Corp. (IMN)
    Kinross Gold Corp. (K)
    Magna International Inc. (MG)
    Methanex Corp. (MX)
    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)

  22. I know this is an older list but just be aware if you are a Canadian Interactive Brokers client and you hold any of these stocks such as ECA on the US exchange you will be screwed when it comes to the US dividend as they will withhold the 15% tax even though they shouldn’t. According to them their systems can’t handle this scenario and rather than correct it they will tell you not to own these shares with them.

    • @js: I try to keep this list current. I did not know that Interactive Brokers deducts a withholding tax on Canadian stocks for Canadian residents. That’s terrible.

  23. I guess one should not buy these Canadian stocks on US exchanges since they will take 15% witholding tax.

    So, how do you buy them via CDN exchanges by using Scotia I-Trade and still get dividends paid in USD?

  24. Rainbird, it’s only the plain ineptitude of the Interactive Brokers software that withholds 15% tax on Canadian stocks bought in USD.

    No other broker available in Canada does that. Vote with your money and don’t support plain old stupidity which is taking a bite out of your wallet.

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  26. If I hold BEP (the US-traded version of BEP.UN) inside a TFSA at Questrade, will it be subject to withholding taxes? I’m guessing the answer is yes, but only on its US-based income, which would be the same as BEP.UN.

    Can anyone confirm if this is the case?

    Is there any advantage to holding BEP.UN in my TFSA instead of BEP?

  27. Agrium and Brookfield Asset Management make it impossible to receive their dividends in $USD if the shares are held in a Canadian broker account. That is because both of AGU and BAM automatically convert their distributions to Canadian currency if the shareholder is a Canadian resident. The situation applies even if the shares are held on the US side of the broker account. In fact, if the shares of AGU and BAM are held in the US side of the account, then the dividends will go through a double currency conversion (first AGU or BAM converts the dividends from $US to $Cdn, and then the broker will convert the dividend back to $US).

    The only way for a Canadian shareholder to receive $US dividends from AGU and BAM is to have the shares held directly by the Transfer Agent.

    • I hold AGU in my US account. And, although the process of getting dividends in US$ may be as you describe, there is no erosion of the dividend resulting from the conversions.

    • We are with RBC Direct and hold a couple of these stocks on the US side of our RRSPs which receive & reinvest dividends as advertised above.

      We recently purchased some POT shares and had them journaled to the US side but their $US dividends are converted to $Cdn and then converted back to $US for reinvestment shares (double Grrr!).

      RDI says that is just the way it is for Canadian residents holding POT shares.

      Is this the same story across other brokerage firms?

  28. nice discussion here on a couple unpleasant aberrations from Interactive Brokers. I’d heard they were failling to render correct T5 tax slips with the eligible canadian dividend tax credits, but i hadn’t known they were also collecting a pseudo-US 15% NR withholding tax as well.

    taken together, the 2 are not tolerable, imho. IB clients would be better off holding canadian stocks paying USD dividends in canadian side of the account, accepting whatever FX fee IB would charge to convert those dividends, while also receiving full dividend tax credits & suffering no phony 15% “withholding” tax.

    (to rain) this unpleasant situation obtains only chez Interactive Brokers & possibly some other small privately-held firms. AFAIK the canadian bank-owned brokers utilize systems that are able to process all these details accurately.

    turning now to another topic, i stopped by to see if Algonquin Power AQN could be added to the list of USD dividend payors. Algonquin switched to USD dividends in october 2014. The dividend amount is USD .0875, says the AQN website.

    unusually, the TSX has failed to update. If i get a chance i’ll drop them an email, ask them to update the AQN profile.

  29. Has this problem been solved or is it hidden to me?
    I have BAM.A and IMG in my BMO Investorline account (discount brokerage account) and I don’t see any conversions. BAM.A comes in US dollars now since Dec 2013 and IMG in Canadian dollars, the last dividend I see is July, 2013.

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