Most people would agree that an asset allocation should include a defined percentage dedicated to international investments. As a dividend investor, this has been one of the more difficult allocations within my portfolio. I have identified several difficulties in locating, acquiring and owning international stocks: 1. Number of Dividend Payments per Year Most international countries pay dividends only once or twice a year - far less than the quarterly dividends that we Americans have grown accustomed to. For me dividends are one form of feedback as to how well the company is performing. I prefer more feedback to less. 2. The Amount of the Dividend Payments It is the custom in many international countries to payout dividends as a fixed percentage of earnings each year. This will often result in larger overall payouts, but the payouts are irregular. In America we are accustomed to steady growing dividends, valuing consistency over maximum payout. 3. The Amount and Timing of Taxes on Foreign Dividends Most foreign countries will deduct their tax before sending you the dividend. Fortunately, most have treaties with the U.S. where you can claim a credit for the tax withheld. 4. Currency Risk Recently as the U.S. dollar has strengthen vs. other currencies, I have seen a steady decline in the dividends received, even though none of the securities have lowered their local currency dividend. 5. Risk of Political Unrest That wonderful dividend company you found may be located in a not so wonderful country.
1. Number of Dividend Payments per Year Most international countries pay dividends only once or twice a year - far less than the quarterly dividends that we Americans have grown accustomed to. For me dividends are one form of feedback as to how well the company is performing. I prefer more feedback to less. 2. The Amount of the Dividend Payments It is the custom in many international countries to payout dividends as a fixed percentage of earnings each year. This will often result in larger overall payouts, but the payouts are irregular. In America we are accustomed to steady growing dividends, valuing consistency over maximum payout. 3. The Amount and Timing of Taxes on Foreign Dividends Most foreign countries will deduct their tax before sending you the dividend. Fortunately, most have treaties with the U.S. where you can claim a credit for the tax withheld. 4. Currency Risk Recently as the U.S. dollar has strengthen vs. other currencies, I have seen a steady decline in the dividends received, even though none of the securities have lowered their local currency dividend. 5. Risk of Political Unrest That wonderful dividend company you found may be located in a not so wonderful country.
