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Discussion Starter #1
I'm going to up my first investment account... Hurrah!

I was reading into preferred shares and dividends and everything I've read says don't put them into a registered account.

Now I am I right in thinking these articles were written pre-TFSA? Cause I assume that a TFSA is a perfectly fine place to have dividend yielding stocks for DRIP. Cause there is 0% Tax payable on the account. Can some one confirm or deny this for me please.

The articles were hammering on about how a registered account strips away tax advantages.
 

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Putting them inside your TFSA or RRSP do a couple of things from my understanding:
1) If you buy high and sell low(bad) you can't claim the capital loss against your income and pay less tax. As long as you don't sell for less than you paid, this doesn't matter.

2) Dividends are already taxed lightly, so, if you have other investments that are more likely to go up in stock value(capital gains) it would be better to have those inside your TFSA / RRSP where you don't get taxed on it. Then you could hold your Dividends outside and pay less tax on that income. However, if you don't max out your RRSP / TFSA with non-dividend stocks, there isn't any real reason not to hold them within one of these accounts (other than point #1).

In the end unless you take a loss on the stock price, and have room left over, these are good options.

This is just my understanding and I could be wrong...
 

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Regarding holding dividend-paying stocks in an RRSP or TFSA, it really depends on which tax bracket and province you're in. If you're in the lowest tax bracket, in most provinces the effective tax rate on eligible dividends is negative. In the second bracket, the effective rate ranges from -0.4% (BC) to 15.8% (Nova Scotia). In the top bracket, the range is 14.6% (Alberta) to 29.7% (Quebec). This really only matters for determining whether you are better off holding a dividend paying stock in a TFSA vs a non-registered account.

Regarding holding dividend-paying stocks in one's RRSP compared to a non-registered account, you have to determine whether you are better off paying tax on dividends now compared to when when the funds are deregistered. I think the math favours paying tax now unless you expect to be dropping down 2-3 tax brackets in retirement.
 

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Discussion Starter #5
Found something interesting on MDJ. A post that stated if you earn more than the bottom tax bracket you should keep your dividends in an RRSP.
 
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