Why ADR dividends arrive smaller than the declared amount

How it works

An American depositary receipt is a US-traded claim on shares that sit with a custodian abroad. The company pays its dividend to that custodian in its own currency, and a chain of intermediaries turns it into a dollar credit in your account.

1. The issuer declares a dividend per ordinary share, in its home currency.
2. Withholding, if the home country levies it, comes off at source.
3. The depositary bank receives the cash, converts it into dollars, deducts its fee per ADS, and pays the net amount to the Depository Trust Company.
4. DTC allocates it to the banks and brokers that hold the ADSs for their customers.
5. Your broker credits you, net.

The SEC's investor bulletin on ADRs describes the fee step plainly. Depositary banks charge holders "custody fees, sometimes referred to as Depositary Services Fees", and "a common practice for collection of the custody fee is for the ADR depositary bank to subtract the amount of the fee from the gross dividends". DTC "will announce both the gross dividend rate and the net dividend rate after deduction of the ADR custody fee".

So the declared dividend, multiplied by the ADS ratio, is a gross figure nobody pays you. What reaches the account is that figure after tax, after conversion and after the fee. The withholding step is the subject of tracking foreign dividends and the tax withheld from them; this page is about the other two.

Where the fee is written down

Two documents, both free on EDGAR, and you need only one.

The deposit agreement, filed as an exhibit to the issuer's Form F-6 registration statement. The bulletin points to it: "Investors should review the fees reported in the Form F-6 registration statement". In Reckitt Benckiser's agreement, below, the schedule is paragraph (7) of the form of ADR attached to it, headed "Charges of Depositary".

The annual report on Form 20-F. Item 12.D.3 requires the issuer to "describe all fees and charges that a holder of American Depositary Receipts may have to pay, either directly or indirectly", including fees for "receiving or distributing dividends" and "general depositary services, particularly those charged on an annual basis", and the depositary's right "to collect fees and charges by offsetting them against dividends received". Item 12.D.4 adds "all fees and other direct and indirect payments made by the depositary to the foreign issuer". Annual reports put this under Item 12, and it is the faster read.

Two filings, two schedules

The ceilings vary by agreement. Two filed in 2026 show the range.

Reckitt Benckiser and JPMorgan. The deposit agreement filed on Form F-6EF on 5 August 2026 lets the depositary charge holders:

• up to 5 cents per ADS for any cash distribution;
• up to 5 cents per ADS for a distribution of securities or their sale proceeds;
• an aggregate fee of up to 5 cents per ADS per calendar year for administering the ADRs, payable at the depositary's discretion by billing holders "or by deducting such charge from one or more cash dividends";
• up to 5 dollars per 100 ADSs issued or cancelled;
• reimbursement of the custodian's and its own expenses in servicing the shares.

Each ADS represents one-fifth of an ordinary share.

Infosys and Deutsche Bank Trust Company Americas. The 20-F for the year to 31 March 2026, filed on 15 June 2026, lists a fee not over 1 cent per ADS for each cash distribution, an annual fee not over 2 cents per ADS, and not over 5 cents per ADS to issue or surrender ADSs, plus the depositary's taxes, transfer fees and "customary expenses incurred by the depositary in the conversion of foreign currency". Each ADS represents one equity share. The dividend section says cash dividends are paid to the depositary in rupees and "distributed, net of Depositary fees, taxes, if any, and expenses".

The same 20-F answers Item 12.D.4. For fiscal 2026 "the Depositary has made payments to Infosys totaling to approximately $5.04 million (post deduction of withholding tax)", which the company may use for investor-relations costs of the ADR programme. The fee flow is not only from holder to bank.

The conversion rate is a second charge

The fee schedule is in cents; the currency conversion is a spread on a rate, and it is easier to miss. Reckitt Benckiser's agreement lets JPMorgan convert through its own foreign exchange desk, acting "in a principal capacity" for some currencies, at "a published benchmark rate" or a third-party rate, "in each case plus or minus a spread". The depositary discloses which rate and spread apply on its own website, and the agreement states that they may differ from rates the bank gives other customers. If the company pays the depositary in dollars, no conversion is made.

So two holders of the same company's dividend, one holding the ordinary shares and converting at their own broker and one holding the ADS, can receive different dollar amounts with no fee line on either statement explaining the difference.

What it costs

A per-ADS fee is fixed in cents while the dividend per ADS is not, so the same fee is a different share of every payment.

Infosys's board recommended a final dividend for fiscal 2026 of 25 rupees per share, which the 20-F puts at approximately 26 cents. With one share per ADS, the 1-cent ceiling on a cash distribution is about 3.8% of that payment, before withholding and conversion, and before any annual fee.

Under a 5-cent ceiling the arithmetic is steeper. On a dividend of 50 cents per ADS, 5 cents is 10%; on 25 cents it is 20%. The ratio decides which: an ADS representing a fraction of a share carries a fraction of the share's dividend, and the per-ADS fee does not shrink with it.

The bulletin's own example is older and broader: fees "assessed per ADR", so that "1000 ADRs could be assessed a fee ranging from $20 to $50". When the ADR pays no dividend to deduct from, "DTC charges the fee to its users (i.e., banks and broker-dealers) who pass them on to their customers", which is the unexplained debit some holders find on a statement.

What you can do about it

Read the fee before you buy. Open the issuer's latest 20-F through SEC EDGAR and search for "fees and charges"; Item 12 lists them. If the 20-F is unclear, the deposit agreement in the F-6 is the binding text. Note three numbers: the fee per cash distribution, the annual fee, and the ADS ratio.

Divide the fee by a typical dividend per ADS. One line of arithmetic tells you whether the depositary takes 2% or 20% of each payment. A low-yield ADS with a small ratio is the case where the fee is largest relative to what you receive.

Look up gross and net when a dividend is announced. The bulletin notes that DTC typically announces both. The difference, less any withholding, is the depositary's deduction for that payment.

Record what your broker credited, not what was declared. If your dividend tracker fills dividends from declared amounts, it records a gross figure. Snowball Analytics and DivvyDiary can show figures net of a tax rate you set, but a tax-rate setting is not a depositary fee. If the tracker lets you edit a received payment, enter the net amount from your statement; tracking dividends across brokers covers collecting it.

Expect a separate debit on non-paying ADRs. If an ADR you hold pays no dividend, the annual fee arrives as its own charge from your broker. Check its amount against the agreement's annual ceiling.

Know that the fee belongs to the ADR, not the company. Ordinary shares on the home market are outside the deposit agreement. They carry their own costs, in currency conversion, market access and custody, and the comparison between the two routes is yours to make with your broker's numbers.