The case for Canadian Depositary Receipts

Compelling blend of accessibility, simplicity, and currency stability

For Canadian investors, gaining exposure to global equities has always come with a familiar set of challenges: namely foreign exchange risk, high share prices for U.S. mega-caps, and the administrative complexity of holding foreign securities (e.g., withholding tax on U.S. dividends).

As with most things in the investment industry, find a problem, engineer a solution. The solution in this case was Canadian Depositary Receipts (CDRs), which blend accessibility, currency stability, and fractional ownership into a single, exchange-listed product. As global diversification becomes increasingly essential, CDRs are carving out a meaningful role in the modern Canadian portfolio.

What exactly is a CDR?

A CDR is a Canadian-listed security that represents a fractional interest in a foreign company’s stock. Much like American Depositary Receipts (ADRs), which give U.S. investors access to foreign equities, CDRs give Canadians access to global giants like Apple, Amazon, NVIDIA, Eli Lilly, to name a few, without ever leaving the Canadian market.

The fractional interest is a key feature. Each CDR reflects an ownership interest based on a ratio set by the issuer at the time the CDR is launched in a fraction of the underlying share. The determinative ratio is designed to establish a per share price for the CDR that is closer to levels that appeal to individual investors.

By way of example, the Apple Inc. CDR (TSX: AAPL) was recently trading at C$44.61 per share. At the same time, the common shares of Apple Inc (NSD: AAPL) were trading at US$316.83 (~C$436.76). The fractional interest is calculated by dividing the Canadian dollar value of APPL on the Nasdaq by the Canadian dollar value of APPL that trades on the TSX. In this case, the ratio is approximately 10:1, which means that 10 APPL CDRs equal one AAPL share.

Currency hedged

That CDRs trade in the host currency is an attractive option that allows investors to capture the underlying stock’s performance without being subjected to currency swings. The currency hedge adjusts daily, which is reflected through minor changes to the CDR ratio. If the U.S. dollar strengthens, the ratio decreases; if it weakens, the ratio increases.

The currency hedge is not a free lunch. CIBC, which issues CDRs, estimates the cost at roughly 60 basis points (0.60%) annually, which as mentioned, is embedded in the CDR ratio rather than as a separate fee.

Because the CDR ratio adjusts daily, price movements reflect the underlying company’s performance in local currency terms. When Apple rises 2% in US dollar terms, the AAPL CDR rises roughly 2% in Canadian dollar terms, minus the hedging cost.

Liquidity considerations

While most CDRs can be purchased in size without any undue friction, the largest and more popular CDRs, like Apple, Amazon, Microsoft and Nvidia, trade actively with tight spreads. Smaller or newer CDRs may have wider spreads, which is why we use limit orders to gain exposure.

Dividends

Most of the larger names pay dividends. These dividends are passed through proportionally and paid in Canadian dollars. Because the hedge neutralizes currency effects, dividend income tends to be more stable than holding the U.S. shares directly.

Investment implications

CDRs offer a compelling blend of accessibility, simplicity, and currency stability. They solve real problems for Canadian investors and provide a clean way to access global leaders without the friction of foreign-exchange conversions or high share prices.

But they’re not perfect. The embedded hedge cost is real, liquidity varies, and they subject portfolios to company-specific risk. In some cases, the best way to get unhedged U.S. exposure is to use currency hedged ETFs, which eliminates company specific risk by providing instant diversification.

Richard Croft is Founder, Chief Investment Officer, and Portfolio Manager of R.N. Croft Financial Group Inc.

Disclaimers

Content © 2026 by R.N. Croft Financial Group Inc. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited. Used with permission.

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Investment funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently, and past performance may not be repeated. The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.

R N Croft Financial Group Inc. is a Licensed Discretionary Portfolio Management and Investment Fund Management company serving investors and investment professionals across Canada since 1993.

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