Learn about dividend reinvestments on Wealthsimple

Overview

With dividend reinvestments, you can automatically reinvest your cash dividends into additional shares or fractional shares of the underlying stock. This means that when you receive a dividend, instead of paying you in cash, we use the money to buy more of the same investment.

Advantages of dividend reinvestments

Dividend reinvestments offer several advantages:

• Compounding returns: Reinvesting dividends allows you to buy more shares, which can lead to even more dividends. This can create a snowball effect, increasing your investment's growth potential over time.
• No commission: You typically don't pay any commission when reinvesting dividends.
• Fractional shares: You can buy fractional shares, so almost all of your dividend is reinvested.
• Dollar-cost averaging: Dividend reinvestments help you participate in dollar-cost averaging (investing regularly over time instead of all at once), which can reduce the impact of market volatility.

How dividend reinvestments work

When you turn on dividend reinvestments, we automatically use your dividends to buy additional shares or fractional shares of the same investment. We place these purchases as fractional orders, which aren't instant. This means your dividend may not be reinvested on the same day it's deposited into your account.

Important notes:

• Dividends can sometimes take 1–2 business days to appear in your account. We can only reinvest your dividend once it's in your account.
• We buy shares on the open market, not through a reinvestment plan offered by the company.
• If there's a small amount of cash left over after your dividend is reinvested, it means the shares were bought at a better price than expected. That leftover cash stays in your account.
• You can turn dividend reinvestments on or off at any time.
• Reinvested dividends don't count toward your contribution room.

Dividend reinvestments apply to the net amount received after any applicable taxes (such as foreign withholding tax). For foreign securities like US-listed ETFs, a portion of the dividend may be withheld before it reaches your account. This means the reinvested amount may be less than the gross dividend reported on your tax slips.

Foreign exchange fees and dividend reinvestments

If you hold USD investments in a non-USD account, we'll charge foreign exchange fees when reinvesting USD dividends to purchase USD securities. This is the same way we apply foreign exchange fees on regular orders. We don't charge foreign exchange fees when you turn off dividend reinvestments in your non-USD account.

If you hold USD investments in a USD account, we don't charge foreign exchange fees regardless of whether you have dividend reinvestments turned on or off.

Understand your dividend payout currency

Your dividend payout currency depends on your account type and the currency the stock trades in.

• If you hold the stock in a CAD account, dividends are always paid in CAD. If a dividend is declared in USD, it's converted to CAD.
• If you hold the stock in a USD account, dividends are paid in the currency the stock trades in: CAD for Canadian-listed stocks and USD for US-listed stocks.

You can't choose a different payout currency; it's set by your account type and where the stock trades.

Tax implications

Dividend payments are considered income and are taxed accordingly, depending on the account type where you hold the dividend-paying stocks.

• Registered accounts (like TFSAs and RRSPs): Dividends earned in registered accounts aren't taxed while they stay in the account. However, foreign withholding tax may still apply to dividends from foreign securities.
• Non-registered accounts: Dividends earned in non-registered accounts are taxed as income.

For more information on how dividends are taxed, please consult a tax professional.

Frequently asked questions

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