I recently started investing with a focus on dividend growth paying stocks and this week I wanted to add four new positions in solid companies, with solid track records of decades of dividend growth and payments. I wanted to invest in McDonalds (MCD), Chevron (CVX), Exxon Mobile (XOM) and Coca Cola (KO). I liked the prices of them all. All of them trading around support. All of them below their 200 moving average etc. I simply loved what I thought were good opportunities. Even though my focus on this account is the dividends, I don't want to have bad entries in overpriced instruments.
First problem, I didn't have US dollars in my Questrade account at that point. I talked to support, and they can exchange some of your CADs for USDs so you can purchase USD listed stocks, but there will be a 2% fee!!! Really?????? Not only that! They see that as borrowed money, that you eventually have to give back to them, and in the mean time they charge a daily fee as interest for the money they are lending you!! Isn't that pretty? That's a big NO - NO. Specially if you are investing for the long term.
So, that's definitely a big problem for Canadian investors and traders, the different currencies.
I had some USD funds in my savings account at TD and had a Draft order sent to Questrade on Monday. That way there won't be any currency conversion fees, or interests or anything like that. Unfortunately, the draft is not at Questrade yet, and all 4 companies I wanted to invest in are more expensive now after the rally of the last two days. So, due to this problem, Canadians face greater chances of missing opportunities with all these nuisance and absurd delays. If I want to trade stocks listed in the Toronto Stock Exchange I can move Canadian money from my TD account to Questrade online and it only takes one day. But that is not allowed for USD Funds (Unless you send them a photocopy of a cheque from your USD bank account in advance) The problem is that at least TD doesn't print out USD cheques with your name and address on them, which is the only way Questrade would accept them. Agggrrrrrr!!!!! With Royal Bank I can't even have US dollar accounts because I am still a Cuban citizen, one of the evil countries of the world and they say, they are not allowed due to legal regulations. Funny because TD has no problem with that. Maybe they are subject to different regulations?!??! I don't know, I probably don't even want to know. All I know is I had to leave Royal Bank for this reason and take my business somewhere else.
If an American wanted to invest in US companies they wouldn't go through so much hassle. It can be argued that they would have the same problem if they wanted to invest in Canadian companies but not really, because the most important Canadian companies are also listed in US stock exchanges (Bank of Nova Scotia (BNS), the Potash Corp of Saskatchewan (POT) , Rogers Communications (RCI), TD, Royal Bank etc).
Second problem is, your dividends from American companies are subject to withholding taxes, even if you are investing in a Tax Free Savings Account (TFSA) Aggggrrrr!!!!! Obviously, Americans receiving dividends from Canadian companies are probably subject to some taxes a well, but the point is,...they don't need to! The US markets are so huge that they don't need to be invested in Canadian markets, period. I am of the opinion that we, however, should have exposure to some American companies.
But enough with the complaints. Complaints won't take us anywhere. What to do? How to solve this situation?
Well, one possible solution is if Canada adopted USD as its official currency. Lol. That's not going to happen. Another solution is to go down to the US with a T1 visa and have income down there in US dollars. But the less drastic one, and perhaps the only one I can do now is wait for a better exchange rate and convert as many CADs as you can into USDs. If we ever getback to parity, or with a Canadian Dollar stronger that the US dollar, I will see myself changing as much as I can. TD offers a special rate where they charge you 1.5 cent above the actual current rate. Let's say for example the USD and the CAD go back to parity 1.0000, at some point and you want 10000 USD. TD will ask you for 10150 CAD for that. That is they will offer you a 1.0150 rate (1.50 cents above parity). You can go to Western Union and they will probably offer a 5% penalty hehe, plus a commission fee for the transaction. Or you can use Questrade and their 2% fee plus their ongoing interest. By the way in order to get the "preferential" 1.5 cent penalty with TD you need to have an All inclusive banking package (which requires you to keep a minimum balance of 5000 Canadian dollars in your chequing account.) otherwise the penalty is 2.5 cents.
Once you do that and accumulate the USDs during the good times, don't wait! Send the draft in advance to Questrade. Not because you want to trade or invest immediately, but simply because you want to avoid absurd delays the moment you need to. And if we never get back to parity,.........well,...........you have to do what you have to do I guess,....suck it up!!
By the way I opened two new positions in Canadian companies on Thursday:
Emera Inc (EMA): 51 shares at $29.35 with a 4.77% yearly dividend on cost.
TransCanada (TRP): 33 shares at $44.64 with a 4.12% yearly dividend on cost.
There are now 6 positions in my dividend income portfolio. All of them in Canadian Companies. Expected passive income from dividends next year $389.24.
Grab the bull, and grab it by the horns!