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U.S. DRIPs for Canadians
With the world's largest economy just south of our border, it's hard to ignore the U.S. market as a Canadian Investor.
Which is why many Canadians who invest in Canadian DRIP & SPPs look to diversify with U.S. DRIP & SPPs.
Just like in Canada, To be eligible for a U.S. DRIP & SPP you need to be a registered shareholder. OR you can start investing through a Direct Stock Purchase Plan (DSPP). Through a DSPP you can fill-out a form and mail in a check for a specific minimum amount and be directly enrolled.
BE AWARE: Even though there are MANY U.S. companies offering DRIP/SPPs, they don't all offer a Direct Stock Purchase Plan and fees are quite common.
ALSO, U.S. dividends are taxed differently for Canadians, and could be subject to withholding taxes, so do you research accordingly. It may be wiser and simpler to invest in U.S. stocks in your RRSP.
There are MANY MANY websites that list U.S. listed stocks that offer DRIP & SPP Plans, so I won't list all U.S. DRIPs.
You can refer to a list of 'Dividend Champions (U.S)' maintained by David Fish and take note of the 'FEES' column.
Open a Specific U.S. dollar account at a Canadian Bank
** This is no longer an option as the checks do not clear through a U.S. branch. See alternatives below **
** Out-of-date information kept for archival purposes **
Royal Bank of Canada
1.) U.S. Personal Account ~ No Longer Available as of Aug. 25th, 2008 Read Letter
2.) RBC Access USA You can open this account from any Canadian Royal Bank Branch. No Free Checking option. $2.95/mth
HIGHLY recommended to fund this account using XE.com (see below) as exchange rates are better those by RBC.
*June-2011: Royal Bank sold its U.S. operations (RBC Bank/Centura) to PNC Bank. LINK
Bank of Montreal - BMO
1.) Personal Bank account (U.S. $). Par Crossed Checks ~ No Longer Available as of March 19, 2008. LINK
DUCA - Credit Union
1.) US$ Dollar chequing account - Reported to offer Checks that clear through a U.S. Branch.
TD Canada Trust
1.) TD Canada Trust will assist you in opening a TD Bank (U.S. operations) checking account, see below.
Open an U.S. dollar account at a U.S. Bank
Your best option is to open an actual U.S. Checking account at a U.S. bank. Some banks let you do this over the phone/mail, others require you visiting in person. Obviously this may require living very close to the U.S. border to visit a U.S. bank.
Another benefit is for traveling/shopping/online shopping in the U.S.A. Having a U.S. bank account is very beneficial as you can control your exchange rate and fees if you use XE.com
I will not list every bank, but here are some that other Canadians have used:
1.) TD Bank (USA) - TD Convenience Personal Checking account
$15/Month service fee, waived if balance of $100 is maintained. To Open Call: 1-877-700-2913 *Canadian Passport required*
Banner Bank, Point Roberts, WA - Vancouver Area residents
2.) Personal Checking account minimum $100 opening deposit, free checks and Debit Card.
Harris Bank
3.) Everyday Checking minimum $100 opening deposit, free checks and Debit Card.
(NO LONGER FREE AFTER 1-NOV-2013, $15 MONTHLY FEE WAIVED IF BALANCE OVER $1,000)
To Fund your U.S. Checking Account - Open an XE.com account
A cost effective way to move converting funds between a regular Canadian bank account and your U.S. based account is with an XEtrade.com account. This is to purely fund your U.S. account and transferring funds.
The entire process to setup your XE.com account takes about 2 weeks, and the 1st funds transfer takes 7-8 days. After that funds exchanges using the free EFT/ACH transfers take 4-5 business days.
Enroll in a U.S. DRIP using a Direct Stock Purchase Plan
1.) Research and choose the company you wish to invest in. Some have a minimum initial amount you have send it to start out. Find the enrollment documents on the Company's website (usually in the Investor Relations section) and mail in the filled documents with the check for the correct amount.
2.) You can also use the services of a specialized broker, called The Moneypaper (www.directinvesting.org) who will purchase one share for you and enroll in the DRIP automatically.
Complete a W8-BEN form for reduced withholding tax
The U.S. Government withholds 30% of dividend payments to foreigners UNLESS, in the case of a Canadian, declare their citizenship and a lower 15% withholding tax is applied. When you enroll in the DRIP of the U.S. stock, the Transfer Agent should send you a form since your address will be in Canada and you will mail it back to them.
There is no U.S. Withholding tax for U.S. securities held in retirement accounts (RRSPs, RRIFs, etc..) due to a reciprocal tax agreement between the countries. This does not apply to TFSAs.
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