When Canadian Depositary Receipts were launched about 18 months ago, they offered an appealing new way for investors to get access to big U.S. tech stocks.
The latest batch of CDRs are a reminder that there’s much more to these securities than tech now. Specifically, there’s a good selection of dividend-paying stocks.
The latest five CDRs include Procter & Gamble Co. (PG-NE), a classic dividend-growth stock. P&G has a 66-year history of dividend increase, the most recent being a 5-per-cent bump in April. Another new CDR is United Parcel Service (UPS-NE), which has been a strong dividend grower in recent years, and in early December offered a yield around 3.2 per cent.
CDRs, which trade on the NEO exchange, offer a money-saving advantage over buying U.S.-listed shares. You don’t have to undergo the costly process of your broker converting your Canadian money to U.S. dollars, and you don’t have to pay brokerage commissions priced in U.S. dollars, either. Instead, your Canadian dollars will be converted at a more favourable institutional rate by the managers of the CDR.
CDRs are currency hedged and thus unaffected by fluctuations in the Canada-U.S. exchange rate. Also, they’re much more affordable than many U.S.-listed stocks because their price at launch is set in the $20 range. P&G shares listed on the New York Stock Exchange have traded in the US$150 range lately, while the NEO-listed CDR version recently traded around C$26. Each CDR is equivalent to a fraction of a U.S.-listed share.
P&G’s yield was around 2.5 per cent, a reminder that blue-chip U.S. dividend stocks often have yields that are lower than we commonly see in the Canadian market. Two other recently launched CDRs are Honeywell International Inc. (HON-NE) and CVS Corp. (CVS-NE), both with yields around 2 per cent.
The highest-yielding name among the stocks included in the recent CDR wave is Abbvie Inc. (ABBV-NE), at 3.5 per cent. Again, there’s a solid record of dividend increases at this pharmaceutical company.
There are now 35 CDRs listed on NEO, all but 10 or so of them dividend-payers. Verizon Communications (VZ-NE) was the yield leader in early December at 6.8 per cent, followed by IBM (IBM-NE) at 4.4 per cent.
Dividends from CDRs are taxed the same as those paid by the shares of companies listed on U.S. exchanges. Consult this dividend investor’s tax guide for details on that.
-- Rob Carrick, personal finance columnist
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Others (for subscribers)
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Compiled by Globe Investor Staff