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HYP - Canadian Shares

General discussions about equity high-yield income strategies
Adamski
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HYP - Canadian Shares

#328947

Postby Adamski » July 27th, 2020, 12:56 pm

I'm thinking of buying some Canada shares for a variety of reasons (have an interest as have family who live there, believe in their economy, etc.), and sent the form off to my investment platform. Been doing some research which may be useful to some others (if I have interpreted it correctly).

Obviously UK banks aren't paying dividends but Canadian banks are so may be of interest to some.

To get the reduced rate of withholding tax need to fill in a form NR301 Declaration of eligibility for benefits (reduced tax) under a tax treaty for a non-resident person.

This form will reduce the withholding tax in an ISA or dealing account from 25% to 15%. In a SIPP there is no withholding tax with US or Canada shares as both countries recognise SIPPs as qualifying pension schemes.

The equivalent form for US shares is a W-8BEN which reduces the withholding tax from 30% to 15% for ISA and dealing accounts.

Please can someone confirm if this is correct:- example, picking Royal Bank of Canada - yield 4.55%, 10Y ann. return 9.15%.

You purchase £1,000 in Royal Bank of Canada TSE:RY. Your charges on buying are £9.95 + FX 1% on £1,000 = £19.95. Net cost £980.05. Dividends paid quarterly. RY's Yield 4.55%. £980.05 x 4.55% x 1/4 = £11.15 - FX 0.5% = £11.09

Anyone else thinking of Canada, or purchased there already? Or picked some US shares to broaden portfolio, or find yield?

Edit: I've just read the pre-emptive relief on withholding tax on Canadian shares is not widely implemented. AJ Bell do it, but most other brokers do not. W-8BEN for US shares is widely available though.

Charlottesquare
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Re: HYP - Canadian Shares

#328980

Postby Charlottesquare » July 27th, 2020, 2:39 pm

I used to hold Middlefield Canadian Inc IT, but they venture into the USA as well re their investments.

https://www.hl.co.uk/shares/shares-sear ... ome-gbp-pc

Edit-Re USA still hold North American Investment Trust

https://www.hl.co.uk/shares/shares-sear ... rd-gbp0.05

Whilst no divs, so not really for here, also hold Berkshire Hathaway as a "sort of US IT"

SalvorHardin
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Re: HYP - Canadian Shares

#328996

Postby SalvorHardin » July 27th, 2020, 3:30 pm

Adamski wrote:The equivalent form for US shares is a W-8BEN which reduces the withholding tax from 30% to 15% for ISA and dealing accounts.

Please can someone confirm if this is correct:- example, picking Royal Bank of Canada - yield 4.55%, 10Y ann. return 9.15%.

You purchase £1,000 in Royal Bank of Canada TSE:RY. Your charges on buying are £9.95 + FX 1% on £1,000 = £19.95. Net cost £980.05. Dividends paid quarterly. RY's Yield 4.55%. £980.05 x 4.55% x 1/4 = £11.15 - FX 0.5% = £11.09

Anyone else thinking of Canada, or purchased there already? Or picked some US shares to broaden portfolio, or find yield?

Edit: I've just read the pre-emptive relief on withholding tax on Canadian shares is not widely implemented. AJ Bell do it, but most other brokers do not. W-8BEN for US shares is widely available though.

Yes, a completed W-8BEN reduces American withholding tax from 30% to 15% for ISAs and dealing accounts. It also works for Canadian shares bought on the NYSE.

Most brokers ignore the Canadian equivalent of W-8BEN, which is a good reason to buy the NYSE listed version of Canadian shares (when they exist) as the W-8BEN reduction applies to these. Some brokers will however apply 25% Canadian withholding tax to NYSE-listed Canadians, rather than the 15% reduced rate for NYSE listed shares (I gather that this is an issue with some custodians, rather than the brokers).

So Royal Bank of Canada shares bought on the NYSE (NYSE:RY), yielding 4.55% gross yield actually pay 4.55% x 0.85 = 3.87% net of American withholding tax. But the Toronto listed shares yield 4.55% x 0.75 = 3.41% net of Canadian withholding tax. Note that if the shares are held outside an ISA you will be able to offset the withholding tax against your UK tax.

I own shares in three Canadian companies; Bank of Montreal, Brookfield Asset Management and Canadian Pacific. I own shares in 10 American companies and have a lot more invested in North America than in the UK. Nowadays I consider North America first for new investments before Britain, even though I live in Britain. Canada and America offer investments that Britain doesn't (e.g. a much wider selection of technology companies, railroads) and whilst the overall market yield is lower than the UK, there are some decent high yielding shares.

If I was setting up a HYP I would definitely consider foreign shares and investment trusts. IMHO the biggest flaws with the HYP strategy are "no foreign shares and no funds". On my watchlist would be KraftHeinz, the other American food companies and the Canadian banks for starters. Plus some of the utilities and several investment trusts (e.g. Henderson Far East Income).

Bank of Montreal has paid a dividend in every year since 1829 (they take dividends more seriously than British banks). Brookfield owns real assets (property, infrastructure, reneweable energy, etc.) and also manages them on behalf of its clients. Brookfield is often called the Canadian equivalent of Berkshire Hathaway, though that's because of its track record as it's a quite different business (Fairfax Financial is Canada's Berkshire Hathaway).

Canadian Pacific, like all North American railroads, has a very strong moat. Geography makes it almost impossible for someone to build a competitor railroad whilst physics gives them an advantage over trucks for longer distance freight (much lower fuel cost per ton-mile).

Below I've linked to a TLF thread, started last April, which is mostly about Canadian bank shares as an alternative to British banks.

https://www.lemonfool.co.uk/viewtopic.php?f=31&t=23185

Wizard
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Re: HYP - Canadian Shares

#329053

Postby Wizard » July 27th, 2020, 8:38 pm

Adamski wrote:I'm thinking of buying some Canada shares for a variety of reasons (have an interest as have family who live there, believe in their economy, etc.), and sent the form off to my investment platform. Been doing some research which may be useful to some others (if I have interpreted it correctly).

Obviously UK banks aren't paying dividends but Canadian banks are so may be of interest to some.

To get the reduced rate of withholding tax need to fill in a form NR301 Declaration of eligibility for benefits (reduced tax) under a tax treaty for a non-resident person.

This form will reduce the withholding tax in an ISA or dealing account from 25% to 15%. In a SIPP there is no withholding tax with US or Canada shares as both countries recognise SIPPs as qualifying pension schemes.

The equivalent form for US shares is a W-8BEN which reduces the withholding tax from 30% to 15% for ISA and dealing accounts.

Please can someone confirm if this is correct:- example, picking Royal Bank of Canada - yield 4.55%, 10Y ann. return 9.15%.

You purchase £1,000 in Royal Bank of Canada TSE:RY. Your charges on buying are £9.95 + FX 1% on £1,000 = £19.95. Net cost £980.05. Dividends paid quarterly. RY's Yield 4.55%. £980.05 x 4.55% x 1/4 = £11.15 - FX 0.5% = £11.09

Anyone else thinking of Canada, or purchased there already? Or picked some US shares to broaden portfolio, or find yield?

Edit: I've just read the pre-emptive relief on withholding tax on Canadian shares is not widely implemented. AJ Bell do it, but most other brokers do not. W-8BEN for US shares is widely available though.

I'd be interested in your info source re the no WHT in a SIPP. My SIPP is with Hargreaves Lansdowne and they said the 15% rate would still apply in my SIPP.

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Re: HYP - Canadian Shares

#329175

Postby Adamski » July 28th, 2020, 12:36 pm

Wizard wrote:My SIPP is with Hargreaves Lansdowne and they said the 15% rate would still apply in my SIPP.


The source is for AJ Bell https://www.youinvest.co.uk/our-service ... al-dealing re US ".. A W-8BEN form is not required for US investments held within a SIPP as the IRS recognises our SIPP as a qualifying pension scheme and all qualifying US dividends and interest are automatically paid to you free of any withholding tax..." and re Canada "A NR301 form is not required for Canadian investments held within an AJ Bell Youinvest SIPP."

Adamski
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Re: HYP - Canadian Shares

#329183

Postby Adamski » July 28th, 2020, 12:45 pm

@SalvorHardin - thanks for the useful info on the Canadian companies/ investments, and how to invest overseas. I agree with your point that HYP should include foreign shares, esp. in these times with dividends cut or cancelled, plus with many of the ftse 100 constituents being international anyway. Think the case is less strong for purists of including funds as this would be including someone else's portfolio within your own.

Alaric
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Re: HYP - Canadian Shares

#329185

Postby Alaric » July 28th, 2020, 12:48 pm

Adamski quoting AJ Bell wrote:A W-8BEN form is not required for US investments held within a SIPP as the IRS recognises our SIPP as a qualifying pension scheme and all qualifying US dividends and interest are automatically paid to you free of any withholding tax..." and re Canada "A NR301 form is not required for Canadian investments held within an AJ Bell Youinvest SIPP."


I think the story is that not all Brokers are prepared to jump through the hoops needed to not suffer the withholding tax for SIPPs on US or Canadian investments. I believe they would have to segregate all the SIPP holdings from everything else and not all of them can be bothered.

I seem to recall that when it was first started AJ Bell was called SIppdeal specialising as the name would suggest in SIPPs.

Wizard
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Re: HYP - Canadian Shares

#329214

Postby Wizard » July 28th, 2020, 3:51 pm

Adamski wrote:
Wizard wrote:My SIPP is with Hargreaves Lansdowne and they said the 15% rate would still apply in my SIPP.


The source is for AJ Bell https://www.youinvest.co.uk/our-service ... al-dealing re US ".. A W-8BEN form is not required for US investments held within a SIPP as the IRS recognises our SIPP as a qualifying pension scheme and all qualifying US dividends and interest are automatically paid to you free of any withholding tax..." and re Canada "A NR301 form is not required for Canadian investments held within an AJ Bell Youinvest SIPP."

Looking at the full paragraph that says...
For Canadian investments, you will need to complete an NR301 form (please see form guidelines here) if you are investing within your Stocks and shares ISA, Lifetime ISA, Junior ISA or Dealing account.  This allows you to benefit from the treaty rate available, currently all qualifying Canadian investments are paid net of 15% withholding tax instead of the full withholding tax rate of 25%. A NR301 form is not required for Canadian investments held within an AJ Bell Youinvest SIPP.

That is not completely clear to me, but I read it as you get the reduced 15% rate in a SIPP but do not need to fill in the form to get it. What do others think?

spiderbill
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Re: HYP - Canadian Shares

#329243

Postby spiderbill » July 28th, 2020, 6:18 pm

SalvorHardin wrote:Most brokers ignore the Canadian equivalent of W-8BEN, which is a good reason to buy the NYSE listed version of Canadian shares (when they exist) as the W-8BEN reduction applies to these. Some brokers will however apply 25% Canadian withholding tax to NYSE-listed Canadians, rather than the 15% reduced rate for NYSE listed shares (I gather that this is an issue with some custodians, rather than the brokers).


I think this is what happened with my Sun Life Canada (SLF) shares.
When I first got them (as I had life assurance with them on my old mortgage) the paperwork was held with HSBC. They handled everything until one day they said I had to move them which was how I came to get a dealing account with them which kicked off my proper investing. I recall them saying that with the new account there was some paperwork from Canada that they couldn't handle and which would cost me a small percentage off the dividends, but they did still handle the W-8BEN. I reclaim some of the witholding tax on my tax return.

Some years later when I opened a 2nd dealing account with Interactive Investors I tested whether they handled it any better by buying a few more SLF, but the maths worked out at pretty much the same. Strangely enough the HSBC dividend comes in £, whereas the ii dividend comes in CAN dollars.

I may say that SLF have been far and away my best investment over the years, combining capital growth and a steady and increasing dividend (even if it would be nice to get all of it!). I have often wondered if there are other Canadian shares that would be worth a try but never got round to researching it properly.

cheers
Spiderbill

biffinsbridge
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Re: HYP - Canadian Shares

#329244

Postby biffinsbridge » July 28th, 2020, 6:27 pm

My wifes HYP has Verizon, this was a result of VOD. They were free so no costs involved, they have been paying quarterly divi's ever since. Capital value has increased by £1000 since. Stay safe Dickie.

Lootman
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Re: HYP - Canadian Shares

#329247

Postby Lootman » July 28th, 2020, 6:46 pm

SalvorHardin wrote:Most brokers ignore the Canadian equivalent of W-8BEN, which is a good reason to buy the NYSE listed version of Canadian shares (when they exist) as the W-8BEN reduction applies to these. Some brokers will however apply 25% Canadian withholding tax to NYSE-listed Canadians, rather than the 15% reduced rate for NYSE listed shares (I gather that this is an issue with some custodians, rather than the brokers).

I am just guessing here but could the distinction be that some Canadian companies have a full listing on the NYSE, whereas other Canadian companies only have ADRs listed?

Then it might be that former come under US rules whilst the latter have Canadian withholding rates?

There are even cases where non-US companies have a dual listing of ADRs on the NYSE, where the parent company is based in two countries. Examples I know of like that are Royal Dutch and BHP. Tax withholding rate for each of the pair is different.

SalvorHardin
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Re: HYP - Canadian Shares

#329251

Postby SalvorHardin » July 28th, 2020, 7:10 pm

Lootman wrote:I am just guessing here but could the distinction be that some Canadian companies have a full listing on the NYSE, whereas other Canadian companies only have ADRs listed?

Then it might be that former come under US rules whilst the latter have Canadian withholding rates?

It's possible, though I think it's got a lot to do with how the broker's custodian views a Canadian share listed on the NYSE and how this works with various tax treaties.

My experience is with Brookfield Asset Management, bought on the NYSE (shares, not ADRs). The shares are held with two stockbrokers. One broker deducts 15% tax. The other broker used to deduct 15% but a few years ago switched to a 25% deduction as instructed by their custodian.

It doesn't bother me much; Brookfield is a low-yielder and the shares which have 25% deducted aren't in an ISA so the withholding tax reduces my UK tax bill :D

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Re: HYP - Canadian Shares

#329280

Postby Wizard » July 28th, 2020, 10:55 pm

As an aside the title of this thread is somewhat oxymoronic, given an HYP is not supposed to include non UK listed shares.

SalvorHardin
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Re: HYP - Canadian Shares

#329288

Postby SalvorHardin » July 28th, 2020, 11:59 pm

Wizard wrote:As an aside the title of this thread is somewhat oxymoronic, given an HYP is not supposed to include non UK listed shares.

Well, seeing as how this isn't HYP-P I thought that a bit more leeway was allowed.

Anyway, HYPs are supposed to only include dividend paying shares but a lot of the shares discussed on HYP-P nowadays don't pay dividends so why aren't they banned? :D

Heck, back in the TMF days RBS and Lloyds went the best part of a decade yielding 0%, nil, zip, nada, nichts, rien, ei, etc. But they were still considered to be okay for HYP discussion.

Whereas an investment trust, or perish the thought a "nasty foreign share" (imagine Gollum saying this, with feeling) was forbidden.

There are people out there who've been relying on their HYP and have seen their income fall by 50% or more because they've followed the "no fricking funds, no filthy foreigners" rule.

Ideological purity don't pay the bills

Wizard
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Re: HYP - Canadian Shares

#329328

Postby Wizard » July 29th, 2020, 8:07 am

SalvorHardin wrote:
Wizard wrote:As an aside the title of this thread is somewhat oxymoronic, given an HYP is not supposed to include non UK listed shares.

Well, seeing as how this isn't HYP-P I thought that a bit more leeway was allowed.

Anyway, HYPs are supposed to only include dividend paying shares but a lot of the shares discussed on HYP-P nowadays don't pay dividends so why aren't they banned? :D

Heck, back in the TMF days RBS and Lloyds went the best part of a decade yielding 0%, nil, zip, nada, nichts, rien, ei, etc. But they were still considered to be okay for HYP discussion.

Whereas an investment trust, or perish the thought a "nasty foreign share" (imagine Gollum saying this, with feeling) was forbidden.

There are people out there who've been relying on their HYP and have seen their income fall by 50% or more because they've followed the "no fricking funds, no filthy foreigners" rule.

Ideological purity don't pay the bills

Just for clarity I was not trying to stop discussion, just pointing out the resulting portfolio would not be considered an HYP by PYADic or TLF guidance. Always happy to discuss non UK options, I see the limitation to only UK listed shares in an HYP as odd and I have never understood the restriction. But that is not the topic here I do not want to divert the thread on to it.

richfool
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Re: HYP - Canadian Shares

#329347

Postby richfool » July 29th, 2020, 9:12 am

Adamski wrote:I'm thinking of buying some Canada shares for a variety of reasons (have an interest as have family who live there, believe in their economy, etc.), and sent the form off to my investment platform. Been doing some research which may be useful to some others (if I have interpreted it correctly).

Obviously UK banks aren't paying dividends but Canadian banks are so may be of interest to some.

To get the reduced rate of withholding tax need to fill in a form NR301 Declaration of eligibility for benefits (reduced tax) under a tax treaty for a non-resident person.

This form will reduce the withholding tax in an ISA or dealing account from 25% to 15%. In a SIPP there is no withholding tax with US or Canada shares as both countries recognise SIPPs as qualifying pension schemes.

The equivalent form for US shares is a W-8BEN which reduces the withholding tax from 30% to 15% for ISA and dealing accounts.

Please can someone confirm if this is correct:- example, picking Royal Bank of Canada - yield 4.55%, 10Y ann. return 9.15%.

You purchase £1,000 in Royal Bank of Canada TSE:RY. Your charges on buying are £9.95 + FX 1% on £1,000 = £19.95. Net cost £980.05. Dividends paid quarterly. RY's Yield 4.55%. £980.05 x 4.55% x 1/4 = £11.15 - FX 0.5% = £11.09

Anyone else thinking of Canada, or purchased there already? Or picked some US shares to broaden portfolio, or find yield?

Edit: I've just read the pre-emptive relief on withholding tax on Canadian shares is not widely implemented. AJ Bell do it, but most other brokers do not. W-8BEN for US shares is widely available though.

Adamski, as mentioned by Charlottesquare, I get my exposure to Canada by way of MCT (Middlefield Canadian Income trust). No tax forms to complete or even stamp duty to pay as its Jersey based. Dividend yield 6.06% (per HL)

https://www.hl.co.uk/shares/shares-sear ... ome-gbp-pc

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Re: HYP - Canadian Shares

#329363

Postby 88V8 » July 29th, 2020, 9:51 am

Wizard wrote:[.... the resulting portfolio would not be considered an HYP by PYADic or TLF guidance.


It was/is a matter of KISS.

But only on HYP-P, not on here.
On here, you can be as foreign as you want.

V8

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Re: HYP - Canadian Shares

#329370

Postby 88V8 » July 29th, 2020, 10:07 am

richfool wrote: I get my exposure to Canada by way of MCT (Middlefield Canadian Income trust). No tax forms to complete or even stamp duty to pay as its Jersey based. Dividend yield 6.06%

Mmm, interesting, thanks.

Periodically issues and buys back its own Prefs.
Prefs seem to be quite a thing in Canada

Often if not usually at a double-digit discount to NAV, which makes me wonder about the NAV.

Dividend was cut in 2009, and has since been static.

Hmmm. Sort of, umm, Fixed Income, but not as we usually know it.

Hmmm.

V8

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Re: HYP - Canadian Shares

#329750

Postby biffinsbridge » July 30th, 2020, 3:54 pm

I have Thomson Reuters, held in crest, which i might bed & ISA later. These transpired after Thomson took over Reuters. They pay a quartly divi, minus Canadian withholding tax. Stay safe Dickie.

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Re: HYP - Canadian Shares

#330789

Postby floyd3592 » August 4th, 2020, 9:55 am

Adamski wrote:Anyone else thinking of Canada, or purchased there already? Or picked some US shares to broaden portfolio, or find yield?


I've done both!

I worked for a while in the US so built up a lump sum in US dollars. I never converted this into GBP /Euros as I intended to spend at least one month of each retirement year (in the UK midwinter) in the US & wanted to use the money to generate an income in USD which wouldn't suffer the vagaries of currency fluctuations. Co-incidentally as i was looking to build up a 'US HYP' basket of individual shares I found I was able to take advantage of HSBC's International Share dealing device, happy days! Also co-incidentally shortly after buying their shares General Motors suspended their dividends & Exxon announced they weren't gonna increase their dividends for the 1st time in living memory, notso happy days...

As part of the my 'US HYP' I have purchased Bank of Montreal through their US listing. The 1st divi from them is due to be paid on 26th of this month so it'll be interesting to see if I just get charged the 15% US withholding tax or the 25% Canadian level tax.

Cheers
Floyd


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