TFSA Investors: Buy This Stock That Just Increased its Dividend by 10% (2024)

FAQs

Should I buy US stocks in RRSP or TFSA? ›

The tax exemption provided for in the Convention between Canada and the United States for RRSPs and RRIFs is rather exceptional and not found in any other tax treaty signed by Canada. Therefore, for tax purposes, it will generally always be better to hold US investments in RRSPs rather than TFSAs.

There are two main ways to invest in dividend stocks: Through funds — such as index-funds or exchange-traded funds — that hold dividend stocks, or by purchasing individual dividend stocks.

Bottom line. There's no right number of stocks to hold in a TFSA, as it'll depend on your overall risk portfolio. However, it's hard to go wrong with five to 10 blue-chip stocks like TD that can generate both capital appreciation and dividend income.

U.S. stocks held in a TFSA are subject to 15% withholding tax on U.S. dividend income. Withholding tax would apply to other foreign stocks held in a TFSA, with rates starting at 15%, depending on the country. Only Canadian stocks are not subject to withholding tax on their dividends inside a TFSA.

If you have cash to put to work in a TFSA and adequate contribution room available, allocating a portion of it to dividend stocks can be a terrific way to grow your money. Between the tax-free dividend income, capital gains, and possible compounded growth, you can be a much wealthier investor when you retire.

Do Canadians pay tax on US dividend stocks? ›

Since U.S. dividends are not paid from Canadian corporations, U.S. dividends do not qualify for the preferential Canadian dividend tax treatment. Foreign dividends, including U.S. dividends, are subject to tax at your marginal tax rate like interest income.

The best investment for a TFSA depends on your unique circ*mstances and hinges on how soon you'll need the money and your risk tolerance. Choose stable investments like cash or GICs for the money you'll need soon. If you are investing for the long term, stocks or ETFs could help you grow your account.

Yes, you can lose money on a TFSA, but it is easy to avoid losing your money. Typically, people who lose their money on a Tax-Free Savings Account are people who are using it for more volatile investments or people who are over-contributing.

If you have a long-term plan to save for retirement, then an RRSP is a smart choice. However, a TFSA can also be used as a retirement vehicle. You may choose one or both investment options based on your specific goals, income and lifestyle.

So assuming you measure your performance in Canadian dollars—and you should—then the currency you used to buy the shares doesn't matter. Your portfolio will rise or fall in value by the same amount either way.

When you buy a U.S.-traded stock, your existing Canadian dollars are converted at the current exchange rate. The stock can be held in a Canadian dollar RRSP account so you can value it with your other holdings in Canadian dollars. Some institutions do have U.S.-dollar-denominated RRSPs and the stock can be held there.

The actual process of investing in stocks in a TFSA is essentially the same as in a non-registered investment account, but you don't pay tax on any Capital gains. This means that, if you sell high, your profits are tax-free.