Which Candiain stocks should be invested in for dividends in TFSA account?

[AlwaysDreaming]

This is hypothetical question: if you had a 1 million dollar TFSA account, what would you invest in for dividend income? This is assuming you take out most of the earned dividends every year to cover all your needs for the rest of your life. Also I mention specifically Canadian stocks because you won't get taxed on the gains in the TFSA. Follow-up question: what would you invest in your if it was a registered account instead?  Any thoughts are appreciated. Thanks!

[AlwaysDreaming]

I want to also note if the stocks could be the "leave it in and forget about it" type of stocks.

[tssuila]

An easy starting point would be our "Big 5" banks - kind of a no-brainer though

[human]

Why dividends? Why not an etf? Is selling really that big of a problem? With a million bucks I'd want at least 20 stocks and in Canada it's all energy and financials. I know there's a withholding tax for us stock.

If you are willing to go through the headache of investing in numerous stocks why not just get a usd account and invest in vti using norbert's gambit?

[daverobev]

As a theoretical question, ok;

as a non-theoretical, remember you get dividend tax credit on Canadian eligible dividends unregistered, plus cap gains are taxed less, so if you were putting a cool mil only into Canadian shit it actually wouldn't make TOO much difference if they were in a TFSA or not.

Also, it doesn't matter *what* you put in the TFSA - you won't get taxed on it (directly). Admitted, the US will take 15% before you see it, but hey. Many other countries won't. So putting something like... ZEA.TO in... would be smarter than having *that* unreg.

Anyway.

FTS, BNS, EMA, RY, TD, SU, BCE, T, and then I'd go and scour RodBarc's list on RedFlagDeals here: http://forums.redflagdeals.com/investing-idea-dividend-growth-1587815/

But yeah, like $50-75k in FTS and EMA to begin with.

[pyyj]

Worth noting is the tax protection of various things in various kinds of accounts:

* TFSA/RESP: Canadian interest, dividends and capital gains. But if you have US equities, the IRS will withhold a non-trivial chunk of your US dividends at source! Yuck!
* RRSP: Pretty much everything fully tax protected capital gains, US dividends, other foreign dividends as well as Canadian interest and dividends.
* Investment account: No tax protection, so you want to use this for things with the best tax advantages: dividends and capital gains.

With all the above, that means I hold a kind of normal distribution bonds/equities (40/60 in my case), but in perhaps abnormal locations? All my bond funds are in the TSA or RRSP, so that the income (which would otherwise be taxed as ordinary income) is protected. My foreign equities and foreign bond funds live in the RRSP, so that the IRS doesn't withhold on me. And the investment account is strictly for Canadian equities thanks to the above noted dividend tax credit, which reduces the tax penalty on that income.

[daverobev]

Worth noting is the tax protection of various things in various kinds of accounts:

* TFSA/RESP: Canadian interest, dividends and capital gains. But if you have US equities, the IRS will withhold a non-trivial chunk of your US dividends at source! Yuck!
* RRSP: Pretty much everything fully tax protected capital gains, US dividends, other foreign dividends as well as Canadian interest and dividends.
* Investment account: No tax protection, so you want to use this for things with the best tax advantages: dividends and capital gains.

With all the above, that means I hold a kind of normal distribution bonds/equities (40/60 in my case), but in perhaps abnormal locations? All my bond funds are in the TSA or RRSP, so that the income (which would otherwise be taxed as ordinary income) is protected. My foreign equities and foreign bond funds live in the RRSP, so that the IRS doesn't withhold on me. And the investment account is strictly for Canadian equities thanks to the above noted dividend tax credit, which reduces the tax penalty on that income.

RRSP is good for avoiding US withholding ONLY if you hold US domiciled things. Holding VUN.TO is still subject to withholding because the US end doesn't know the things held by VUN for you are in an RRSP.

It is argued that it is better to hold low yield things unregistered. You are sheltering low growth things, while having high growth things unsheltered.

My general thought would be to hold US domiciled in the RRSP; stuff like ZEA.TO in the TFSA; Canadian, bonds, and basically anything that doesn't fit unregistered. Of course, your registered room will dictate how much of each 'thing' - just enough, too much, or too little - can go in each of those places.

[pyyj]

RRSP is good for avoiding US withholding ONLY if you hold US domiciled things. Holding VUN.TO is still subject to withholding because the US end doesn't know the things held by VUN for you are in an RRSP.

This is an interesting note. So what if I just go buy VTI directly on the NYSE and hold that in my RRSP? Am I having my cake and eating it too?

[daverobev]

RRSP is good for avoiding US withholding ONLY if you hold US domiciled things. Holding VUN.TO is still subject to withholding because the US end doesn't know the things held by VUN for you are in an RRSP.

This is an interesting note. So what if I just go buy VTI directly on the NYSE and hold that in my RRSP? Am I having my cake and eating it too?

In an RRSP, there will be no US tax on dividends on US-domiciled, US stocks. You will be having your cake and, um, not having anyone else take bites out of it.

Except the Canadian government, when you withdraw :P

[RichMoose]

This is hypothetical question: if you had a 1 million dollar TFSA account, what would you invest in for dividend income? This is assuming you take out most of the earned dividends every year to cover all your needs for the rest of your life. Also I mention specifically Canadian stocks because you won't get taxed on the gains in the TFSA. Follow-up question: what would you invest in your if it was a registered account instead?  Any thoughts are appreciated. Thanks!

The full answer would depend on the value of my other accounts of course; however, I would first fill up the TFSA with my REITs. Then I would fill the remainder with anything that has higher growth potential.

Canadian dividend paying stocks or dividend ETFs are great for non-registered accounts.

US listed stocks/ETFs are great for RRSPs.

[Retire-Canada]

This is an interesting note. So what if I just go buy VTI directly on the NYSE and hold that in my RRSP? Am I having my cake and eating it too?

Well you have to deal with the FOREX costs in that case, but you avoid the 15% witholding tax on your ~2% dividends - so that's 0.3% you'd save each year vs. holding VUN. You'll have to work out if the FOREX costs are worth it depending on your specific situation.

[daverobev]

This is an interesting note. So what if I just go buy VTI directly on the NYSE and hold that in my RRSP? Am I having my cake and eating it too?

Well you have to deal with the FOREX costs in that case, but you avoid the 15% witholding tax on your ~2% dividends - so that's 0.3% you'd save each year vs. holding VUN. You'll have to work out if the FOREX costs are worth it depending on your specific situation.

One option is to buy VUN until you have a sufficiently large amount, then do a 'Norbert's Gambit' to switch CAD to USD.

It's not worth doing forex on small amounts, generally, but 0.3% on $50k? Worth doing, I think.

That's somewhere like Questrade, where buying ETFs is free, and selling costs $5-10.

With Interactive Brokers, forex costs a couple of dollars, so it's worth doing as you go.

With CIBC Investor's Edge, in a registered account, they basically don't charge forex as you can't hold USD; so when you buy US stuff, the conversion is done at spot.

I know some brokers don't even allow you to do Norbert's Gambit. You can, of course, do the forex elsewhere - for example, you can get USD into a Canadian-based RBC savings account, and then do an EFT from that account into an RRSP already in US funds.

[TrMama]

Why $1M? Even for a couple you can only have $93K worth of contribution room. You'd have had to make some fantastically good investments in order to have $1M in a TFSA.

DH and I are recently in a position to max out all our RSP and TFSA space with some leftover in an unregistered account. Our thinking was to carry dividend bearing investments in the unregistered account (with preference given to Canadian preferreds), equities in the TFSA (to avoid cap gains) and the unsexy bonds and GICs in the RSP accounts.

[Retire-Canada]

With Interactive Brokers, forex costs a couple of dollars, so it's worth doing as you go.

I'm no FOREX expert, but I would expect the spread on exchange rates to cost more than a few dollars if you are transferring a significant amount one way. Also keep in mind if you need to spend the money in Canadian you'll be transferring it back in small quantities during FIRE and those costs need to be accounted for as well when you look at the pros and cons.

[daverobev]

With Interactive Brokers, forex costs a couple of dollars, so it's worth doing as you go.

I'm no FOREX expert, but I would expect the spread on exchange rates to cost more than a few dollars if you are transferring a significant amount one way. Also keep in mind if you need to spend the money in Canadian you'll be transferring it back in small quantities during FIRE and those costs need to be accounted for as well when you look at the pros and cons.

With IB you are buying and selling at spot. The spread is tiny. It's not like a forex company where you'll pay 0.5% or 1% spread, or the banks where you pay 2.5%.

But you're right - if you're regularly drawing down, you can do the reverse - convert $50k of VTI to VUN, and sell chunks of VUN - every year sell $10k, or whatever.

[K-ice]

Why hasn't VDY been mentioned?

That seamed like the obvious answer to me but maybe I'm missing something.