International Dividend ETF’s…Adding To The USDP?

By: ispeculatornew
Date posted: 11.21.2012 (4:00 am) | Write a Comment  (2 Comments)

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I’ve talked a lot about adding international stocks to the USDP. Why? Because it adds diversification, which in the end means more returns for a same level of risk which obviously makes a lot of sense when working towards my passive income goals. The major problem or challenge when adding international stocks is that if they are not traded on US markets (listed or ADR’s), there is a lot more complexity and fees involved. You can end up being stuck with fx conversions, fees, taxes, etc. It kind of takes out a lot from my idea of managing a sustainable dividend portfolio in very little time. So what did I decide to do?

Adding ETF’s

You’ll maybe be surprised. After all, I already have an ETF portion to my retirement/long term investing strategy. So why I add ETF’s to my dividend one? I think it makes a lot of sense to get some exposure to a few different dividend stocks to buy ETF’s. That is why I will be adding some level of ETF’s to the USDP in 2013. I don’t expect it to be huge as I do prefer selecting specific stocks for the USDP. That being said, in order to get exposure to high quality international stocks, it will sometimes make more sense to buy an ETF. I’m not sure how this will evolve over time but for now, I’d expect to gradually move to 10-20% of my holdings into internationally focused dividend ETF’s.

Which ETF To Go For?

Let’s start off by looking at the main dividend ETF’s that fit my first criteria:

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If I take a look at the top holdings in IDV for example, here they are:

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As you can see, the vast majority are names that I would not have access to without trading pink sheets which I want to avoid. So I’d be paying about 0.50% annually in order to get access to these names, which seems reasonable to me. I am convinced that my portfolio will end up doing better by including such stocks. The big question will be if IDV is the best ETF for my needs which is something I will continue to monitor between now January. I do expect to only hold 1 or 2 at most.

What are your thoughts? If you are a dividend investor, do you hold strong international stocks? If so, how? ADR’s? ETF’s? Pink Sheets? Buying on foreign markets?

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  1. Comment by Bernie — November 21, 2012 @ 7:27 am

    It would be prudent to know the percentage of withholding tax on distributions before purchasing an International ETF. These taxes negatively impact your total returns.

  2. Comment by IS — November 21, 2012 @ 8:08 pm

    @Bernie – Pretty sure that those withholding taxes are at the fund level so withholding taxes would be for foreign investors buying a US ETF

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