What are Canadian Depositary Receipts (CDRs)?
Canadian Depository Receipts (CDRs) are Canadian-listed investments traded in Canadian dollars that allow investors to own fractional interests in publicly traded U.S. and other international companies.
How do CDRs work?
CDRs offer fractional exposure (which is the equivalent of owning a percentage of underlying shares) to U.S. and other international companies with much of the currency risk reduced through embedded currency hedging. Currency hedging helps limit the impact of exchange-rate fluctuations and allows investors to focus more on the stocks underlying performance rather than movements in the Canadian dollar.
Features & benefits of CDRs
CDRs versus underlying security comparison
Before you invest in CDRs, review these critical distinctions from the underlying securities on which they are built.
| Item | CDR | Underlying security |
|---|---|---|
| Exchange Listing | Canada (Cboe Canada – previously NEO or TSX) | USA (NYSE or NASDAQ) or International Exchange |
| Trade Settlement | T+1 | T+1 |
| Currency in which they trade | CAD | USD or Foreign Currency |
| Currency Hedge to Canadian Dollar | Yes | No |
| Source of dividends | U.S. | U.S. or Foreign |
| Eligible for Dividend Tax Credit (DTC) in Canada | No | No |
| Tax on dividend payment paid to a Canadian withheld at source | Yes | Yes |
| Withholding recoverable | May be recoverable in non-registered accounts. Not recoverable in registered accounts. | Seek tax advice. |
| Considered U.S. Situs property1 1 For tax purposes, Situs property refers to property that is taxed based on its location rather than the owner's residence. As a result, CDRs may be subject to tax in a foreign jurisdiction rather than in Canada. | Yes | Yes |
| Tax slips issued | Not when held in registered plans | Not when held in registered plans |
| Fees (see the CDR FAQ for details) | No direct fees | No |
| Systematic Investing | No – not currently | Yes – check availability |
| Fractional Investing | No | No |
| Qualified Investments held in Registered Accounts | Yes | Yes |
| Intended audience | Canadian residents seeking exposure to U.S. equities at lower cost thresholds on a Canadian exchange | Those looking for exposure to U.S. or foreign equities |
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Important information:
Edward Jones, its employees and financial advisors cannot provide tax or legal advice. Investors should consult their attorney or qualified tax advisor regarding their situation.
Content is intended as educational only and should not be interpreted as specific investment advice. Investors should make investment decisions based on their unique investment objectives and financial situation.
Investors should understand the risks involved in owning investments, the value of investments fluctuates and investors can lose some or all of their principal.