hi pros, since no capital gain tax and 30% tax on dividends on US stocks, do u all look out more for companies which does not distribute dividends or low dividends?
Hello there,
I am not an expert as I have neither financial knowledge nor experience in investing (I started this year), so I hope it is alright to tell you my opinions.
First of all, you need to identify a strategy that you think you would be most comfortable with. If you are planning to build up portfolio value and eventually sell most or all of it off to fund your retirement, going for growth stocks would be more suitable. I think the main thing you need to worry about adopting this strategy is the status of the market when you start feeling the need to sell some of your assets. If a reccession occurs during the period you need money the most, you would have no choice but to either receive less money, or cut off a bigger percentage of your original portfolio value.
If your aim is to earn passive income throughout your lifetime and be less affected by drops in share prices, you can consider going for companies which have strong business fundamentals and pay increasing dividends annually. If you have many years till retirement, you can look for companies with good dividend growth percentages instead of those with high dividends. Eventually, the yield on investment cost for the dividend growth stock will surpass that of the dividend stock. Of course, good companies today might not be around 30 years later, so you have to make an occasional check to make sure your dividend payouts are still increasing.
It would be difficult to take the dividend growth route with a 30% tax in my opinion. Dividend growth investors tend to start out slow and the huge tax will make you start off even slower, leading you to question your strategy. This would be especially so if you have friends who like to brag about their returns. That said, if you have addresses in the following countries and decide to make use of them, you can not only access the SGX with your account (in the case of Interactive Brokers), but also enjoy a lower tax rate. Note that the tax rate applies to general dividends only.
10%: Bulgaria, China, Japan, Mexico, Romania, Russia
15%: Australia, Austria, Bangladesh, Barbados, Belgium, Canada, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Hungary, Iceland, Indonesia, Ireland, Italy, Jamaica, Kazakhstan, South Korea, Latvia, Lithuania, Luxembourg, Malta, Morocco, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Thailand, Ukraine, United Kingdom, Venezuela
20%: Tunisia, Turkey
25%: India, Israel, Philippines
Basically, the stocks you buy should go in line with the strategy you would be most comfortable with. Your horizon will shorten if you decide to do a reset someday, so it is important to be clear of your financial goals.
Apologies for the long post and redundant sections.
