facebookIs it wise to hold dividends stock in US market? Will the various taxes eat into your profit tremendously? - Seedly

Advertisement

Anonymous

26 Jan 2021

βˆ™

General Investing

Is it wise to hold dividends stock in US market? Will the various taxes eat into your profit tremendously?

Does it make sense to dividends stock in US market with the high taxes?

Discussion (3)

What are your thoughts?

Learn how to style your text

View 1 replies

thefrugalstudent

25 Jan 2021

Founder at thefrugalstudent.com

Hi Anon,

The short answer is simply no, because as you've pointed out, the dividend withholding tax (30%) will diminish your returns over time.

This is not a problem for many US tech stocks as they usually don't pay dividends. US ETFs are also largely unaffected by this because they tend to pay out very small dividends, so 30% of that doesn't hurt very much. A workaround this is to buy Ireland-domiciled counterparts of the ETF (ie on the LSE) to get only a 15% hit in withholding tax.

But if you're looking specifically at dividend stocks, this becomes a problem because 30% of a 4-5% dividend yield can make a dividend stock go from hero to zero.

It's for this reason that it is usually advised to hold US equities for capital gain, as Moolah-Man has mentioned.

If you're keen on dividends, a good option to consider would be REITs.

Hope this helps!

Regards,
thefrugalstudent

You can have a look into dividend ETFs with a long track record and see if you're satisfied with the...

Write your thoughts

Advertisement