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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: Hello 5i Team
Further to previous comments this morning and apologies for the length.

Comments on the Brookfield family of companies, US $ dividends and tax implications.

From the Brookfield website:
Please note that the quarterly dividend payable on Brookfield's Class A Limited Voting Shares is declared in U.S. dollars. Registered shareholders who are U.S. residents receive their dividends in U.S. dollars, unless they request the Cdn. dollar equivalent. Registered shareholders who are Canadian residents receive their dividends in the Cdn. dollar equivalent, unless they request to receive dividends in U.S. dollars. Prior to the September 30, 2016 payment date, the Canadian dollar equivalent of the quarterly dividend was based on the Bank of Canada noon exchange rate on the record date.
Beginning with the March 31, 2017 payment date, the Canadian dollar equivalent of the quarterly dividend is based on the Bank of Canada daily average exchange rate exactly two weeks (or 14 days) prior to the payment date for the dividend.

What this means is the Brookfield entities "declare" their dividends/distributions in US$ and the transfer agent (Computerserve) pays the broker in Canadian dollars (as the broker i.e. beneficial holder is a Canadian resident ) regardless of whether the shares are held in a Canadian or US dollar denominated account. If the shares are held in a US$ dollar account the broker then "buys" US$ to pay the share owner's account. This results in a small under or over payment of the actual dividend/distribution depending on how exchange rates have moved. This is how my brokerage (RBC Direct Investing) explained it.

Further to the tax issues:
The limited partnerships (BBU, BEP, BIP, BPY) pay distributions which are recorded on a T-5013 (and not a T-3 or T-5). The distributions are a combination of eligible dividends, interest income, foreign income, return of capital and other items depending on the entity. Companies have until March 31 to issue each years T-5013 (similar to a T-3 issued for REITs) which results in delays in filing annual income tax. Therefore it is better to hold the LPs in a RRSP/LIRA/TFSA if you want to simplify your annual tax return, however if the entities are held in a RRSP/TFSA there may be foreign withholding tax that cannot be recovered. Previous years breakdown of the distributions can be found on the individual LP's web page. Each individual should review their tax situation with a their individual tax expert.

BIP and now BEP move to create a Canadian Corporation which will issue eligible dividends will make life much simpler from a tax perspective.
Read Answer Asked by Stephen on November 12, 2019
Q: I asked a question about Gamehost on Fri. Maybe it got lost because I asked a 2nd Q on FSZ. I notice most q's on Gamehost were actually Q's on Guardant. Your last true answer on Gamehost was back in July.

I am looking over Gamehost for income with the very juicy dividend. I am assuming the fall in price has more to do with Fort Mac woes than base Gamehost earnings? What do you think of Gamehost for income?
Read Answer Asked by Gerald on November 11, 2019
Q: I have a question about Brookfield Asset Management (on the TSX).

There was an earlier question from another person that suggested keeping BAM.A in Registered Accounts as to avoid some very complicated tax filings on its dividend. Can you shed some light on this: Is the dividend an Eligible Dividend under Canadian Tax rules or is it sometimes a combination of various return of capital or ineligible dividends? Also does it pay the dividends in US dollars? It's not very clear from their website. Thanks
Read Answer Asked by Eugene on November 11, 2019
Q: With the fall of DR, particularly for income investors, the question is what to do. Michael posed this earlier. What would you advise? You had responded that there is better places to put capital, but such a decline has eroded that capital and reinvesting the reduced amount does not produce much.
How would you advise an investor at this point? Sell, and crystalize the loss and reinvest what little remains? Hold on and wait for a bounce? Settle in for a long wait?
Ideally, investors would have sold before now. I do not see any such advice within your answers, DR was always described as a solid hold and waiting out several quarters was recently recommended.
Read Answer Asked by Danny on November 08, 2019
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