FX rates on dividends

Freetrade Chat 🔥
1

I understand the costs of buying stocks in foreign currency, but I can’t find any info on the website or on the forum on the dividend payments.

If you have US stocks, the dividends get converted back into pound automatically, so you pay FX conversion before it arrives to your account? And if you want to re-invest, it gets converted yet again?

So is this conversion back and forth happens forever? Isn’t there a way to bypass it and make it re-invest before it converts it back and forth? As I understand receiving a dividend and re-investing it costs 0.9%. Right?

I understand that ETFs often are divided into Acc and Dis (Accumulative and Distributed) but individual stocks don’t have that distinction and you have no control over what happens to the dividend. Does that mean there is no way to avoid this nearly 1% fee that will occur forever?

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2

I will just address the final point: you would have to open a brokerage account in the relevant foreign currency to avoid Forex charges of the type you mention.

If you are talking about an ISA then I am afraid you cannot side step this issue as foreign currencies are not allowed as per HMRC rules.

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3

Allowing auto-reinvesting is a simple feature that could bypass this back and forth and would stay within the ISA rules because you wouldn’t actually need to hold any cash in a foreign currency for any period of time.

For a long term investor, losing 0.9% on all dividends for 40+ years amounts to an enormous sum.

Alternatively FreeTrade could wave the Fx Feeds on dividends only, until they implement such feature.

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4

No that is not the way auto reinvestment via a brokerage works. And no you can’t bypass Forex dividends that way in an ISA.

All of the brokerages make money in one form or another. You should compare the different brokerages to see what is optimum for you.

5

Yes I don’t mind their high FX fee for anything else, my question is specific to dividends.

I will test it for a year and see then how much I’d earn if I moved US/EU stocks elsewhere.

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6

It is quite a low Forex fee compared to e.g. Interactive Investor and Hargreaves and Lansdown.

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7

Currency pot feature request has been made so many times and ignored. Every div payment I get from my US stocks gets hit by FX, and I reinvest. It is evil and unjust and investors lose big time! : Freetrade’s cash cow.

Currency pots NOW

*Disclaimer: **I do not have an ISA**. Only a GIA.*
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9

Most ETFs are in British Pounds anyway.

In relation to individual stocks, you should take this into account before deciding if you would like to invest in American dividend paying stocks.

OR - open an account with a brokerage in US currency.

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10

Divs could be paid into an FX pot, or re-invested without any conversation.

The fee when I re-invest each tr compounds over years. It is a killer for me.

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11

I took this into account when deciding where to invest.

There are some very reliable UK based companies that pay good dividends. Shell, BP, Legal and General, Aviva, National Grid, most utility companies etc to name a few.

I can’t see FT implementing what is said here as there are good alternatives already…

Invest in UK dividend paying stocks, accept the FX fee on US stocks, or open an account with a brokerage in US currency.

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12

AKA don’t use FT. And off it snowballs!

13

I’ve always thought it was great value … given its 0%

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14

Be honest @NeilB , you just wanted to flex your Apple dividend didn’t you :money_mouth_face: :money_with_wings:

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15

Again? Yeah, a little.

But also just to correct an error

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16

Even if there was an fx fee I don’t see how it’s a ripoff considering you pay £0 to trade and use the platform.

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17

So is the FX Rate 0 for dividends? I mean, that was my original question

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18

Yes, the FX fee is. The rate is whatever freetrade’ s FX broker says.

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19

Okay this is great, thanks for the info!

I would recommend FreeTrade making that a bit more explicit in their docs because I couldn’t find this info anywhere. Unless you receive a dividend (which I haven’t yet) you wouldn’t really know what to expect.

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20

Is that quarterly or monthly @NeilB :thinking:

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It’s 1/2 yearly i think. I’m not planning to retire just yet …

I have a big weighting towards big tech as my inflation hedge and it’s okay so far I’m beating VWRL & S&P500.

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