Aussie Dividends for NZ Investors

[Lizard]

I've always preferred small-cap, dividend stocks, including on the ASX. However, dealing with these seems to gradually get more difficult.

A few years ago, the National Bank introduced a $5 charge for banking overseas cheques (one charge for any number of cheques). Now this has been extended to $15 for no more than 3 cheques. In addition, the time spent standing at the counter while these are processed is mounting up... easily a twenty minute job to bank 5 or 6 cheques at a time. I frequently post cheques to a full-service broker, although they also charge a fee for processing (not sure the actual amount at present) - and this is usually the best option, but costs still mount.

Spreads on FX at the banks are difficult to check regularly, but seem to have widened considerably over the years - I remember them being around 0.8%, but would usually be 1.5-2.0% these days.

My latest issue has been receiving the usual registry letters wanting an Aussie bank account details, but now seem to be saying that they are not going to issue cheques at all - no bank account, no dividend, although it is possible to get the DRP. Taking the DRP is an option, but I prefer not to due to the difficulty of selling between ex-div and payment date - i.e. end up with an unmarketable parcel if this happens.

I have looked at opening an ANZ Australian bank account on line but have been advised that I will be unable to access the funds in it unless I turn up in Australia to verify my identity. I guess this could be worth it, but I don't have any particular desire or other reason to take a trip to Australia at the moment - particularly taking off time during the week to do so. (It is also likely to be difficult to open one for some types of accounts such as an Estate.)

The other option would be to go to custodial arrangement with a phone broker, but then have to incur much higher brokerage and 0.25% pa custodial fee.

Am wondering if anyone has any other clever suggestions that I haven't tried yet to reduce costs?

[RazorX]

Hi Lizard

I might be completely wrong here, but can't you get AU dividends banked to a Direct broking OMCA in AU dollars? That was my understanding, but its been a while since i looked at the subject. If that is the case you could open up an account with them if you haven't already. Might be a bit of a pain if you are with another broker though.

Razor

[Lizard]

Thanks Razor. I have a DB OMCA account, so I will find out! Can anyone confirm that this is do-able?

[Lizard]

Just checked the OMCA FAQ's and found this:

Can I pay my AU, US or UK dividends to the OMCA?

Clients who have an OMCA and who trade US/UK shares via our Custodial Trading service now have the ability to receive their incoming corporate action funds in the applicable currency – e.g. USD, GBP, EUR etc. You can select your payment method for US/UK dividends by going to My Preferences.

Australian dividends paid to you by Australian Dollar cheque can be posted to Direct Broking and deposited into your OMCA AUD account. Please note that an 8 day clearance period applies for Australian Dollar cheques. The OMCA cannot accept Australian Dollar direct credit payments for Australian dividends.

So that solves the cost-of-banking problem... but doesn't solve the problem of companies that are moving to electronic-only divs. However, I am thinking that the only ones that can move to this completely must be those with a DRP at this stage, so may have to run with that option. Hopefully, if it becomes more widespread, ASB and DB will come up with solutions.

[POSSUM THE CAT]

Lizard Check your Private Messages regarding opening Australian Bank accont without going to Australia

[POSSUM THE CAT]

Lizard Do not Forget to take your passport

[aspar13]

Hi

Are you looking at retaining the dividend amount in AU$? I get Australian dividends directly paid into regular NZ$ bank account.

[OldRider]

Lizard: I have not done this, so am only talking second hand, and don't know the bank concerned, but have been told that after opening an Australian bank account, it is possible to get from the bank a form to use in NZ to verify your identity. The original form must be returned by mail after being signed by whoever it needs to be, think it might be a solicitor?, this will enable you to draw from the account.

I use the BPay system for new issues etc and find it simple, have an Eft-pos card for when we are over there, as well as cheque book which I rarely use.

[Lizard]

Hi

Are you looking at retaining the dividend amount in AU$? I get Australian dividends directly paid into regular NZ$ bank account.

How does this work (accounts etc) and how did you set it up? I was able to do it with BHP when I held them, but all other company forms have asked for an Australian Financial institution. Someone else also told me today that Computershare offered to do that for them - though only for shares on Computershare registries. I haven't noticed receiving that offer, but perhaps will contact them in that regard.

[Lizard]

Lizard: I have not done this, so am only talking second hand, and don't know the bank concerned, but have been told that after opening an Australian bank account, it is possible to get from the bank a form to use in NZ to verify your identity. The original form must be returned by mail after being signed by whoever it needs to be, think it might be a solicitor?, this will enable you to draw from the account.

I use the BPay system for new issues etc and find it simple, have an Eft-pos card for when we are over there, as well as cheque book which I rarely use.

I rang three banks yesterday before running out of time - Nat Bank and BNZ told me that they could not open an Australian account for me. ANZ gave me a somewhat amazing run around. In the end, I had to ring their 0800 number 4 times and go through the whole rigmarole of giving my name, contact details and reason for calling and then being told either someone would call me, that the person I needed to talk to wasn't available, that I should talk to someone at a different branch and then, finally was told I could actually open the account on line, with the caveat about having to turn up in Australia. I was assured that they couldn't verify me here in NZ as they were separate institutions.(!). Actually, when I look on line, there is a place to click if you are an Australian resident and a place to click if you are moving there - otherwise it says to call an Australian phone number, which I haven't tried.

Another person has told me that ASB offered to open them a CBA account, but they weren't sure if they were going to have to turn up. I have yet to get any information on Westpac.

From various conversations, it does seem that if you can track down the "right" people at the banks, it may be possible to open an account from New Zealand, but I have yet to locate.

Meanwhile, I did get a response back from one registry where a company has said "electronic only" dividends and was told the company was still intending to pay overseas holders by cheque. I suspect that they are still required to do so under the rules. So it seems I probably don't have to forgo any dividends yet through not having an Aussie account, but still good to find the simplest and most cost-effective route to avoiding the expense and messiness that is increasingly created by handling foreign cheques.

Getting the divs directly into an NZD account could be good. Although having access to Bpay would also be very useful, so I'll keep looking into both options.