# TFSA and dividends



## daddybigbucks (Jan 30, 2011)

Is it possible to hold stock in a TFSA and get the dividends mailed out to your personal address?


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## pablito (Apr 3, 2009)

I would imagine that it would be up to the institution where you have your TFSA (bank, brokerage, whatever) to allow you to set that up or not, fees, etc?. However, I would expect the dividends payouts to be treated as a withdrawal from the TFSA with its associated consequences. Basically, it would given you that additional room for new contributions to the TFSA, but not until the start of the next calendar year.

Pab


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## Eclectic12 (Oct 20, 2010)

I suspect most institutions won't want to take on the extra costs of writing cheques and mailing them out to the home address.

Maybe the stock company might ... but since the TFSA is a registered account, that would require a lot of extra paperwork/cost.



Cheers


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## Toronto.gal (Jan 8, 2010)

I called my broker, and as suspected, the answer is nope, not available [you can do so with non-registered accounts].


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## CanadianCapitalist (Mar 31, 2009)

You may be able to do this on your own if your broker allows unlimited and free TFSA withdrawals (TD Waterhouse, for example, allows this). Just call the broker after the dividend is deposited in your TFSA account and request a withdrawal.


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## DavidJD (Sep 27, 2009)

CanadianCapitalist said:


> You may be able to do this on your own if your broker allows unlimited and free TFSA withdrawals (TD Waterhouse, for example, allows this). Just call the broker after the dividend is deposited in your TFSA account and request a withdrawal.


Re: TDW - True, however the first time you withdraw each year is free and there was a charge of $25/withdrawal then on. I am not sure if this is still the case...


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## daddybigbucks (Jan 30, 2011)

I appreciate the answers.

It sure would be sweet to have a check come in the mail every month, tax free.


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## Eclectic12 (Oct 20, 2010)

^^^^

I'm not sure what the advantage would be.

If the dividends come in the mail as a cheque, you are going to have to cash the cheque, which is extra work and will lose interest while the cheque is in the mail. Then too, if you put it in your bank account which pays interest, it will generate a tax bill.


On the other hand, by letting the dividends be paid to the TFSA - it stays tax free (i.e. no tax on interest), can be re-invested if the TFSA account allows it and can be transferred out as cash when you need it. 

For example, if I need some cash from my TFSA, I can have it in my bank chequeing account anywhere from next business to four days from now.


So personally, I prefer to leave the dividends being paid to the TFSA.


Cheers


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## Toronto.gal (Jan 8, 2010)

Eclectic is right!

If you were to buy a BBQ chicken at Loblaws for *$11.99* with those funds daddybigbucks, remember you would be paying $13.55 in total.

I never use dividends other than for reinvesting atm.


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## daddybigbucks (Jan 30, 2011)

Soooooo, if you reinvested your dividends into stocks and a stock crash happened. Your $30 stock is now $10, and your $100 in divendends is now worth $33. But i would still be able to invite you over for bbq chicken and wine.

I dont know if you guys had dividends cheques come in the mail, but it does have alot of positives that may be hard to explain.


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## Toronto.gal (Jan 8, 2010)

1. Try to invest it in solid undervalued/single digit stock, so the fall is not so painful. 
2. Crash or no crash, you would have higher # of shares.
3. Thanks for the invite.


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## Sampson (Apr 3, 2009)

Seems there are 2 issues you are discussing.

1) getting cheques
2) reinvesting via DRIP or synthetic DRIP programs.

You can easily opt out of 2, collect cash in your TFSA account, then make withdrawls when you need to buy food.


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## Toronto.gal (Jan 8, 2010)

daddybigbucks said:


> Your $30 stock is now $10, and your $100 in divendends is now worth $33.


I could not elaborate on this point earlier. I see it in a different way.

Let's assume the following example:

- you have 500 sh purchased @ $10 [$5K]
- stock pays an annual/quarterly div. of $.24/$30 respectively
- assume you drip about 8 shares/yr. [allowing for flunctuations]

*Market crashes:*

- you buy additional 500 sh @ $5 [$2.5K]
- div. is now reduced to $.12 annual
- quarterly div. = $30 [unchanged given you doubled your shares]
- if no change in div., then q. payment = $60
- assume you drip 16 shares/yr. under reduced div. scenario/or 34 if div. not changed [much higher # than before crash, given the price collapse]

*Market recovers:*

- you have 1,000 shares to sell + those purchased with dividends [which btw, could be worth a lot in a future year { I mean the free shares}] 

- Initial ACB is now reduced from $10 to $7.50 [excluded cost of dripped shares]

I realize averaging down is not always a possibility/or even recommended [depending on fundamentals, price, etc.]. I also realize that we don't always have the funds to take advantage of market crashes. My point, however, was that price drops = opportunity as well, so if you don't need the dividend, let it work for you.

You can always use dividend payments for something else; not necessarily drip, but 2 buy other stocks.


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## Sherlock (Apr 18, 2010)

I don't understand the cheques in the mail thing, I thought dividends haven't been mailed out since the days before online banking, at least 10 years ago. Do people still get dividend cheques in the mail today? If so, why would you choose that option as opposed to simply having the money deposited into your account?


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## Toronto.gal (Jan 8, 2010)

Sherlock said:


> simply having the money deposited into your account?


And then, one could simply do a cash transfer to one's banking account, but I believe you need to phone-in for registered accounts.


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## Sherlock (Apr 18, 2010)

No, I remember withdrawing money from my TFSA to my chequing account, I did it online and did not need to phone in.


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## Sampson (Apr 3, 2009)

What sort of sums are we talking about? Say you had a YOC of 10% on $25,500 contributed. That's $2,550 per year, or $637.5 per quarter.

Easy peasy to call in and ask the broker to make the transfer from the registered account out. If it is more realistic amounts 4% YOC, $255 per quarter, is it really worthwhile?


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## Toronto.gal (Jan 8, 2010)

I did *not* know that Sherlock, as I never withdraw my div. 

In that case, I'm not sure why div. payments would be mailed.


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## Sampson (Apr 3, 2009)

I still get dividend cheques in the mail, some holdings of Telus through transfer agent before the internet


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## Eclectic12 (Oct 20, 2010)

daddybigbucks said:


> ...I dont know if you guys had dividends cheques come in the mail, but it does have alot of positives that may be hard to explain.


Feel free to give it a try to explain what you see as a positive for getting a dividend cheque in the mail. 

I'm pretty sure my EFT dividends to my account are available for my use earlier than I'd get around to cashing a dividend cheque, ignoring possible additional delays from the mail system.


Maybe one of the positives is that it takes longer to spend? 

I have yet to think of or have explained anything about the dividend cheque that is an advantage. If there is an advantage, I'd expect it would be easy to explain. I might respond that it does not apply to me but am perfectly willing to agree, if it is an advantage to someone.


Cheers


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## Eclectic12 (Oct 20, 2010)

Toronto.gal said:


> And then, one could simply do a cash transfer to one's banking account, but I believe you need to phone-in for registered accounts.





Sherlock said:


> No, I remember withdrawing money from my TFSA to my chequing account, I did it online and did not need to phone in.


From what I've read and I've esperienced, it depends on the account type and/or the financial institution.

For example my HISA TFSA, I've gone online, done the transfer to chequing and wrote a cheque on the same day. For my brokerage TFSA, I have to call in to request the transfer. Since I don't want to get into a withdrawal habit, I'm okay with the phone call (and it gives the brokerage agent a chance to remind me that putting that amount back has to wait until next calendar year).


Cheers


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## daddybigbucks (Jan 30, 2011)

I was being a bit snarky earlier because its a pet peeve of mine when someone says their way is the right way.
True, i dont get divend cheques in the mail anymore because i moved around a bit and it got to be a pain. But any transfer agent can set that up for you (ie. compushare).
My grand plan is to live off dividends. It would be great to teach the wife and kids the benefits of saving/investing. for instance, If a dividend cheque comes in the mail from our cineplex stock, then we plan to go to the cineplex for a movie for free.
just thought it would be fun way to teach some money basics.


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## Eclectic12 (Oct 20, 2010)

Sampson said:


> What sort of sums are we talking about? Say you had a YOC of 10% on $25,500 contributed. That's $2,550 per year, or $637.5 per quarter.
> 
> Easy peasy to call in and ask the broker to make the transfer from the registered account out. If it is more realistic amounts 4% YOC, $255 per quarter, is it really worthwhile?


True ... but then again, if these were quarterly cheques at $255 - is that anymore worth while.


To be clear, it's not so much that I'm against it so much as I have yet to find an advantage (except maybe making it more difficult to spend as the cheque has to arrive/be cashed).


Cheers


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## jamesbe (May 8, 2010)

I just let my dividends grow in cash in my TFSA. Once I have enough for a mortgage payment, I have to transfered out to my bank account online and make an extra mortgage payment.


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## Eclectic12 (Oct 20, 2010)

daddybigbucks said:


> I was being a bit snarky earlier because its a pet peeve of mine when someone says their way is the right way....
> 
> It would be great to teach the wife and kids the benefits of saving/investing. for instance, If a dividend cheque comes in the mail from our cineplex stock, then we plan to go to the cineplex for a movie for free.
> 
> just thought it would be fun way to teach some money basics.


That's where knowing the wife & kids comes in handy. If a cheque is something that's tangible plus a more effective teaching tool than reviewing the statements and doing the transfer bit - then by all means. That would be a great advantage.

Without mentioning the teaching bit - it was hard to see any advantage & I was asking as I'm never sure when I've overlooked something or whether there's other factors that may/may not apply to me.


Cheers


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## Cal (Jun 17, 2009)

daddybigbucks said:


> Soooooo, if you reinvested your dividends into stocks and a stock crash happened. Your $30 stock is now $10, and your $100 in divendends is now worth $33. But i would still be able to invite you over for bbq chicken and wine.
> 
> I dont know if you guys had dividends cheques come in the mail, but it does have alot of positives that may be hard to explain.


Not sure how to interpret this statement. If the stock crashes or something, you still get the same dividend payment, unless the company cuts their dividend. Which in turn could crash the stock price.

In the example you gave above, the $30 stock would be $10, but your $100 in dividends would still be $100, cash retains its value the share price is what drops. Unless you were to drip the shares, then your $100 would either be 3 more shares plus $10 (if the dividend was reinvested prior to the share price drop), or it would be 10 more shares (if the dividend were reinvested after the share price fell to $10).

I don't believe you can get a cheque from a TFSA account investment. Only if you hold the share directly, the transfer agents will ensure that you get your dividend payment via cheque. (assuming you do not participate in a drip program)

In a TFSA, just deal w a broker that you can transfer ther funds over into a chequing account electronically w no penalty or fee.


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## Toronto.gal (Jan 8, 2010)

I was confused by that statement as well, that's why I posted that lengthy div. example.


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## Eclectic12 (Oct 20, 2010)

Cal said:


> Not sure how to interpret this statement.
> 
> If the stock crashes or something, you still get the same dividend payment, unless the company cuts their dividend...


If they company doesn't cut their dividend for a reasonable amount of time, then likely the crash from $30 to $10 was the market over-reacting. In that case, the share price won't stay at $10 for long as it will be seen as a bargain and buying will drive up the price.




Cal said:


> ...I don't believe you can get a cheque from a TFSA account investment. Only if you hold the share directly, the transfer agents will ensure that you get your dividend payment via cheque. (assuming you do not participate in a drip program)
> 
> In a TFSA, just deal w a broker that you can transfer ther funds over into a chequing account electronically w no penalty or fee.


That's why I am thinking there won't be that option - RRSP direct share plans are not that common (likely because of extra paperwork/cost) so I'm thinking a direct TFSA would be even less likely.


As for the TFSA withdrawals, have all brokers gotten rid of the "first withdrawal is free, additional withdrawals have a charge"?

I haven't surveyed the brokers in a while.

Cheers


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