It is astute of you to notice the 30% withholding tax before you invest in dividend stocks in the US!
If you'll allow me to share my personal example:
In splitting my investment portfolio between the US and Singapore markets, i paid attention to the strengths and drawbacks of the stocks of each market.
Like you pointed out, the 30% withholding tax of US stocks' dividends was a big issue for me. Who woud want their dividend payouts to be reduced unnecessarily? But, I also realised that US stocks (even the big caps) are generally more dynamic (or volatile). This means that investments in US stocks could be used to derive strong capital gains.
Conversely, SG stocks are less dynamic. But, we have a suite of attractive REITS what are regulated to pay out a significant portion of their income as dividends. Several blue-chip stocks in Singapore also pay out generous dividends. For example, the banks at this time pay out in excess of 3%, while ST Engineering typically has a dividend yield in excess of 4%. Naturally, the SG stocks could be targeted for a dividend strategy.
With that in mind, I focus on growth and value companies among my stock picks from the US markets. On the other hand, I identify stable companies with a good track record of sustainable and generous dividend yields to generate income.
Some investors call this a dumbbell strategy - growth/value investing on one end and income investing on another. This has so far worked well for me =)
If you are keen to build a dividend portfolio in the US market, consider investing into dividend aristocrats and kings. You will still get affected by the 30% withholding tax but over time the dividend increases will cover the amount.
To get a better yield on cost, sell put options on the stocks to get the shares at some discount.
I personally do not go for overseas dividend stocks. Reason being, aside from the withholding tax, s...
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