The Price for Quality

I’ve been very interested in starting investing in S&P 500 Dividend Aristocrats, but the fact that I would have to pay 30% dividend withholding tax really dampens my mood.

Think about it, 30% tax on every time your dividend is compounded in growth! Makes me wonder how viable a dividend growth strategy is for non-US investors investing in US listed stocks.

So I looked at Hong Kong listed stocks. 0% capital gains tax and 0% dividend tax = heaven for any dividend growth investor.

That’s if you can find quality dividend growth stocks.

The sobering fact was, after scouring through the whole Hong Kong stock exchange, there was not a single Hong Kong listed stock that had dividend growth for 25+ years.

Heck, there wasn’t any Hong Kong listed stock that didn’t cut dividends for 25+ years. Or even worse, there was not a single Hong Kong listed company that grew dividends for 10+ years.

There were only Hong Kong listed companies that didn’t cut dividends for 10+ year, and that’s already filtering out companies that pay the same amount of dividends for more than 2 years in a row.

And how many were there that didn’t cut dividends for 10+ years and also had less than 60% dividend payout ratio? Only eight, and they are:

  • Tencent (HKEx: 700)
  • China Everbright International (HKEx: 257)
  • ENN Energy (HKEx: 2688)
  • Soundwill Holdings (HKEx: 878)
  • Cheung Kong Holdings (HKEx: 1)
  • Cheung Kong Infrastructure (HKEx: 1)
  • Pioneer Global (HKEx: 224)
  • Hysan Development (HKEx: 14)

So when considering the alternatives between buying best in the world dividend growth stocks with a 30% tax penalty versus buying okay quality dividend growth stocks with 0% tax penalty, I think it’s obvious that the 30% tax penalty is nothing compared to the access of quality that it allows.

[Disclaimer]

Not advice. No offer. Do not rely. May lose value. Risky. Conflicts hidden/obscured. (Borrowed from Terrence Yang‘s Disclaimer on Quora)

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