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. 😀
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.
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. 😉
Random Useless Fact:
Atoms have mass. Nuclear weapons are detonated by splitting atoms, which literally makes them weapons of mass destruction.
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.
Take your time to decide and make the right decision. 🙂 The company wont be going anywhere. I’d say the biggest risk to look out for is the possibility of a long and drawn out recession in Europe.
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.
Thanks for the useful information. 🙂 It appears being Canadian has its perks in this case. This investment is also a good currency hedge. If the Euro strengthens against the Canadian dollar then that should boost its profits because Dream Global collects revenue in Euros but pays its investors in Canadian currency.
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 🙂
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.
Thanks for telling us your experience with investment trusts inside a TFSA. It could just be a temporary issue with your brokerage account like Mark mentioned. HR.UN is another great company. 🙂
Great is a big overstatement for H&R, they only increased affo 3% y/y and the market doesn’t get too excited about them.
If you want a great reit, look at mst.un, financial performance and market recognition of performance.
I just took a look at MST.UN. You’re right. It looks like a winner to me. I’ll have to add it onto my watch list. Thanks. 🙂
Great post , especially the explanation of TD codes and tax related information.
Thanks. It’s about understanding the little things that allows us to make informed investment choices. 🙂
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.
Not in the past, but earlier this month I received a message from TD that they are finally allowing U.S. dollars to be held in TFSA or RSP accounts. 🙂 I still need to call them in order to add a US$ component to my existing accounts. Thanks for the reminder.
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.
You might be right. It’s why many people believe holding a diversified portfolio of stocks globally is the best way to go. 🙂
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??
There’s a pie chart of my asset allocation in my About Me page. But generally I have about 75% of my investments in real estate related assets. I suppose if the value of land deteriorates globally then there’s the possibility that all of my properties will be at risk. So far I haven’t experienced a real estate bear market yet though, so I don’t really know the impact one would have across my portfolio. I believe I am somewhat overweight in real estate right now. I would like to diversify into some other assets but in terms of risk/reward balance I don’t see a lot of opportunities elsewhere. 😕 It’s been over 15 years since Canada has had a noticeable real estate correction but when this bull cycle eventually comes to an end it would be interesting to see not only how my finances will react, but also those of people who have most of their net worths tied up to one residential property. 🙂 A tide will probably raise or lower all boats but I think that land is a little different than oil since we can’t move land and the amount of land on the earth’s surface that… Read more »
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.
That’s an interesting reality you bring up. I don’t really understand the employment rate and poverty situation either. It seems a little strange. But I do look at vacancy rates for real estate and overall GDP health of the economy. Both of those metrics are looking pretty good right now in Germany. 🙂 What I like about Dream Global’s properties is that they are office buildings and retail outlets which makes them commercial assets rather than residential homes. This has many benefits. For example their tenants include Google, and other large multinational companies that are very profitable even though most of their business is outside of Germany. It’s like the large GM building in Detroit MI in the United States hires a lot of people, but most of Detroit, especially in the suburbs, are full of signs of unemployment, poverty, and houses under foreclosure. If a REIT was in the business of residential buildings like apartments or condos, then the poverty rate in Germany might be a risk to the long term prosperity of the REIT, but I think Dream Global will be fine because it deals in a separate part of the real estate market. But everything in the… Read more »
Thanks for the update. Good to know that there’s no withhold tax on this stock. More reasons to pull the trigger.
I bet a lot of people buy this company for the juicy yield. 🙂
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 🙂
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