American investors in foreign stocks known as American Depository Receipts(ADRs) have to be aware of a fee called ADR fees. I wrote about this fees a while ago. Below are some five points to remember about ADR fees.
1.Can you avoid paying ADR fees?
Nope, An ADR holder cannot avoid paying this fees in any way. Regardless of the type of account and shares owned this fees has to be paid.
2.Who charges this fees?
The issuer of the ADR such as BNY Mellon charges this fees for maintaining records and other tasks.
3.How should you pay the ADR fees?
If dividends are paid by a security the issuer will automatically deduct the fees from the dividend payments. If a stock does not pay dividends the fees will be charged to the holder. In this case, the you broker will deduct this amount from the cash portion of your portfolio. So always ensure there is some cash in the account to cover any such fees.
4.When is an ADR fee charged?
Timing differs from one ADR to another.Usually it is only once per year. For dividend paying stocks it will be charged at the time of payment. For non-dividend payers it may be any time of the year.
5.How much is the ADR fee?
Depositories charge different amounts of fees for each ADR.
For Ecopetrol(EC) of Colombia the ADR fee mostly recently was $0.04 per ADR. So for 100 shares that amounts to $4.
6.Is the ADR fee charged for all ADRs?
Nope. For some ADRs the custodians may not charge the fee. For example, Citibank, the depository for Autoliv(ALV) of Sweden does not charge this fee.
7.Is there a complete list of all ADRs and their fees?
Yes. The custodians of ADRs maintain the list of ADRs by country and the fees applicable. Check out the below links to check if your ADR has the fee:
8.Is ADR fee charged on Canadian stocks?
No. Canadian stocks are not ADRs. So this fee is not charged for any Canadian stock.
9.Are ADR fees tax deductible?
Unfortunately no for most holders. As the name implies it is not a tax like the dividend withholding tax. So it is not tax deductible.
10.What is the impact of ADR fees on returns?
Since this fee is deducted from an investor’s account – either from dividends or cash balances – it negatively impacts the overall returns on an equity investment. For instance, a $4 from a $100 dividend payment may seem small but it is still $4 lost. If you are enrolled in dividend reinvestment this $4 loss will reduce the number of new shares bought. Over many years the effect of compounding lost due to this $4 loss would not be minimal.
In addition, if an ADR does not pay a dividend then the fee is deducted from cash balances. This will not only reduces the interest that can be earned on the amount but also reduces the ability to deploy such cash when an opportunity arises.
Related Posts:
- ADR Fees: What is it and Why it is Important be Aware of it, TFS
- ADR Fees: 5 Additional Important Facts To Be Aware Of, TFS
- What to do when an ADR is delisted from NYSE or NASDAQ, TFS
Disclosure: Long WBK, EC, ALV
hi, may i know where can I get the lastest list of french ADRs that are subjected to the 0.3% financial transaction tax (Buy trades only, applicable for French ADRs with market cap >= EUR 1 B).
You can find it right here on this website. I wrote this post back in December:
The Complete List of French ADRs Subject to the Financial Transactional Tax
https://topforeignstocks.com/2020/12/09/the-complete-list-of-adrs-subject-to-the-french-financial-transaction-tax/
Hope this helps.
Hi,
For my ADR holding, I am charged ADR fees @ US$ 0.01 per share at the time of dividend payment and the same is deducted from the dividend received and the net dividend amount is then credited to my account. If my ADR pays dividend twice a year, will I be charged such ADR fees twice or it is only once a year, meaning there will be no ADR fees during the payment of 2nd dividend. Please advise. Thanks.
Nope. You will not be charged the ADR fee again for the 2nd dividend payment. ADR fees are usually for a 12-month or 1 year period. So it will be charged only once per year. You can checkout this post for more details:
https://topforeignstocks.com/2016/05/13/adr-fees-what-is-it-and-why-it-is-important-be-aware-of-it/
Thanks.
Hello,
I know this string is older, but I am hoping that you may have some information on day trading foreign companies and adr fees. Are ADR fees only calculated if you are holding the ADR stock on the record date? If you are only holding a stock for a couple of days is the ADR fee still charged? Is it imputed on a daily rate? .02 cents per year / 365. As a day trader we can buy and sell thousands of shares per day. The prospectus of companies speaks to the rate, but does not contain details of holding the stocks for short periods. Any help would be appreciated. Thanks
Yes. That is correct. ADR fees are calculated only if your holding the ADRs on the record date.
So if you are holding just for a couple of days the ADR is not charged. So if you are day trade you have to watch out for the record date.
Nope. It is not imputed on a daily rate. Usually not many investors day trade ADRs. So that’s why the prospectuses may not contain such details.
You can pull up any stock with “Depository Service Fee” here and see it is charged only based on the record date:
https://www.adrbnymellon.com/directory/distributions-dsf
Hope this helps. Thx.