Feb 212015
 

Last month I blogged about investing in German real estate through a Canadian REIT called Dream Global. I chose this investment for its strong foothold in the European economy and for the consistent high yield. Normally dividends from foreign investments are taxed. However because I’ve bought DRG.UN in my Tax Free Savings Account it wasn’t really clear what would happen. Well yesterday I received new confirmation in my brokerage account so I thought I’d post an update. Thanks for the reminder, Bricks. 🙂

Each Dream Global unit currently pays out $0.066667 per month. Since I purchased 180 shares in January I received $12 in distributions this month. As it turns out there doesn’t seem to be any withholding tax on these payments. 🙂 Below is a history of my TFSA transactions for 2015 so far. As we can see near the end of January I initiated a buy order for Dream Global REIT. And then on Feb 13th, when the company paid its investors, I received $12.00 in my account. 😀

15-02-dream-global-purchase-drip

If there had been any foreign with-holding tax it would have been deducted from my account on the same day as I received the DRG.UN distribution. For those who are curious, The abbreviation “TXPDDV” is simply TD’s transaction code used to describe money earned from a combination of different sources including dividend, interest, foreign dividend, capital gains, or return of capital. This is an administrative code used for tax purposes on a T3. In an unregistered account this “TXPDDV” designation means that tax factors have not yet been applied and is frequently misinterpreted as an indication that tax has already been paid. However in a registered account, such as a TFSA or RRSP, there are no T3 tax slips associated with these types of distributions. I called TD Direct Investing earlier today to confirm and that’s what one of their associates told me. So yay. 🙂 I should have invested in this company sooner. 8.7% annual yield on DRG.UN and no tax!

But wait there’s more good news. 😉 Dream Global offers a 4% bonus on their dividend reinvestment plans. Let’s take a look at the stock chart over the last 3 months.

15-02-drg-dream-global-shares

The price per unit is down a little bit since I bought it in January, but the 20 day simple moving average (blue line) is currently trending upwards so that’s a good sign. 🙂

If we look at February 13th, where the vertical yellow line is on the chart above, the unit price hovered between $9.07 to $9.17, closing the day at $9.15. At no point during the day did it fall below $9.07 per unit. However my TFSA transaction history shows that I received a DRIP of Dream Global trust unit on that same day for just $8.72. In other words I was able to buy a unit of DRG.UN at 4% less than the market price. Sweetness. 😀 I’m going to leave DRIP discounts for another post, but basically for every $1.00 of cash distributions reinvested by a unit holder, $1.04 worth of new units will be purchased. 😉

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Random Useless Fact:
Atoms have mass. Nuclear weapons are detonated by splitting atoms, which literally makes them weapons of mass destruction.

 

 

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roadmap2retire
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roadmap2retire

Thanks for the update, Liquid. After your post, Ive been reading up on DRG.UN and going thru their financial statements. It makes for a very interesting investment and I would love to own some real estate in Europe. Unfortunately, all the ETFs have terrible payouts and DRG seems to be a good option. I didnt think there would be tax implications when held under RRSP or TFSA accounts as its a TSX listed stock…but good to get a confirmation from your end.

The P/AFFO seems to be pretty high on the stock – but I am still considering it as an investment. Hopefully I’ll make up my mind soon.

Best wishes
R2R

Investing Pursuits
Guest

Liquid,

It seems like it was a good buy. This link http://dream.ca/global/investors/#tax-information can give you some info on the contribution payments. You can also click on the links on the left of the page. From what I get, the distributions are paid in Canadian dollars. US residents pay a 15% withholding tax and everywhere else is 25%. It also shows that the distribution is about 50% foreign dividend payment. But since you have it in a TFSA, you pay 0% tax, instead of the foreign distribution portion being taxed at your marginal rate.

Dividend Wisp
Guest

Interesting! My understanding of the TFSA’s eligible holdings, as much as I could figure out from the CRA’s vague descriptions and explanations is that the income of the company had to have a certain percentage of it from within Canada, not just the HQ within the country. I ran into the withholding issue with HR.UN, where my first dividend had withholding tax on it, so I sold the position. Only to oddly enough have another dividend come in the next month, with an added cash of refunded dividends from the previous month. Was very odd, perhaps I should have held it longer to find out if tax would be taken, then given back again the following month. Although the differences of HR and DRG could be in the treaties differences between Canada and US/Euro within a TFSA account.

Either way, sounds like DRG is a good way to get some tax sheltered Euro diversification going. And nice DRIPing 🙂

Mark Canada
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Mark Canada

We have HR.UN in our TFSAs and there is no withholding tax that I have seen. Your bank may have made a mistake and then corrected it a bit late.

Wealth Builder
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Wealth Builder

Great post , especially the explanation of TD codes and tax related information.

Mark Canada
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Mark Canada

I see what looks like a currency exchange for your GoldCorp dividends.
Does TD not allow you to journal the shares to a US$ side of your TFSA account to save the 2.5% or so they get for the currecny conversion?

Thanks for all your posts. Dream Global looked interesting enough to get us some as well.

No Nonsense Landlord
Guest

I think international stocks are going to beat the US market this year. They have been laggards, and the USD is strong. As the USD gets weaker, the foreign stocks get better.

Chris
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Chris

Hey Liquid – I am looking into this one as well. Just curious about the real estate weighting of your overall holdings. Obviously you have a lot given your farm land, but have you ever totaled up all real estate linked assets to see what percentage of your total this is? I’m just curious. I realize there is a lot of diversity when you own various REIT’s, farmland, own home, MIC etc – I just wonder if there is any correlation in real estate type holdings in general, even if geographically very diversified. Sort of like energy related holdings right now – doesn’t matter if you hold producers, drillers, service companies or refiners, they have all suffered with the drop in oil price. Could the same thing happen with real estate holdings, and if so, would a large portion of your portfolio be at risk??

Brad
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Brad

Hello,

I really like your ideas and what you’re doing here, but I was a little curious what your take on poverty levels in Germany will do to this REIT. Apparently the poverty rates in Germany are quite high right now, even thou employment rates are low? This doesn’t really make any sense to me but was wondering what your take is on this and how you feel about it with your holdings in Dream Global.

Tawcan
Guest

Thanks for the update. Good to know that there’s no withhold tax on this stock. More reasons to pull the trigger.

Dividend Wisp
Guest

It might have been a mistake since others have been holding it without problems. Next time that happens, I’ll email my brokerage for clarification, lesson learned 🙂