Global High Dividend ETF's

[Newroad]

Afternoon All.

I have long mused that at some point at or during retirement, it might be a reasonable strategy to just lump everything into VHYL

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-high-dividend-yield-ucits-etf-usd-distributing/distributions

and live off the dividends/distributions, currently around 3.26% - supplemented by the odd sale if needed. Going down that line of thought means also considering alternatives - either to avoid single counterparty risk, or because they may simply be better. This led me to the following page on JustETF

https://www.justetf.com/en/how-to/dividend-etfs-world.html

What one is looking for specifically is in the eye of the beholder, but for me, TDGB (yield currently around 4.64%) caught my eye

https://www.vaneck.com/uk/en/investments/dividend-etf/overview/

A slightly different investment universe and remit, better performance over time and higher charges (0.38% vs 0.29%). If I had to go tomorrow (I don't) all things being equal, I might go all in 50% VHYL and 50% TDGB (composite yield c3.95%). Very close to the magical 4% yield at current prices with reasonable prospects of capital gain and reduced counterparty risk - fire and forget in most scenarios.

Thoughts on TDGB welcome, either standalone or as part of a strategy like the above?

It also has a different domicile (the Netherlands vs Ireland). I'd be interested if anyone has a view on this, e.g. considering if

Tax-sheltered, or
Non tax-sheltered, or
Any factor other than tax status of the wrapper?

One related final question. If ETF's outside of a tax wrapper are problematic, what would be the nearest equivalent option which makes sense? For example, are we back to a choice of Global Equity Income Investment Trusts?

Regards, Newroad

[Steveam]

Afternoon All.

I have long mused that at some point at or during retirement, it might be a reasonable strategy to just lump everything into VHYL

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-high-dividend-yield-ucits-etf-usd-distributing/distributions

and live off the dividends/distributions, currently around 3.26% - supplemented by the odd sale if needed. Going down that line of thought means also considering alternatives - either to avoid single counterparty risk, or because they may simply be better. This led me to the following page on JustETF

https://www.justetf.com/en/how-to/dividend-etfs-world.html

What one is looking for specifically is in the eye of the beholder, but for me, TDGB (yield currently around 4.64%) caught my eye

https://www.vaneck.com/uk/en/investments/dividend-etf/overview/

A slightly different investment universe and remit, better performance over time and higher charges (0.38% vs 0.29%). If I had to go tomorrow (I don't) all things being equal, I might go all in 50% VHYL and 50% TDGB (composite yield c3.95%). Very close to the magical 4% yield at current prices with reasonable prospects of capital gain and reduced counterparty risk - fire and forget in most scenarios.

Thoughts on TDGB welcome, either standalone or as part of a strategy like the above?

It also has a different domicile (the Netherlands vs Ireland). I'd be interested if anyone has a view on this, e.g. considering if

Tax-sheltered, or
Non tax-sheltered, or
Any factor other than tax status of the wrapper?

One related final question. If ETF's outside of a tax wrapper are problematic, what would be the nearest equivalent option which makes sense? For example, are we back to a choice of Global Equity Income Investment Trusts?

Regards, Newroad

I can’t help with the main question but your supplemental about ETFs outside a tax wrapper … I assume you’re talking about Excess Reportable Income and if so it really isn’t much of an issue assuming you’re going to be submitting a tax return anyway.

Best wishes, Steve

[clissold345]

TDGB 1/3/5 year total returns are +14.70% / +51.99% /+65.21% (data from Justetf).

From the TDGB factsheet it looks like 15% withholding tax applies to non Dutch investors.

[BullDog]

TDGB 1/3/5 year total returns are +14.70% / +51.99% /+65.21% (data from Justetf).

From the TDGB factsheet it looks like 15% withholding tax applies to non Dutch investors.

Thanks for that. I was looking for withholding tax and didn't see it. The ETF looks an interesting income investment. But if held in a SIPP for income, another layer of tax is very unwelcome. What a shame.

[Newroad]

Thanks all.

It's that kind of thing that I'm trying to flush out.

The Dutch may take a withholding tax (as many authorities do) but how does that work in practise - are they "looking through" to the ultimate holder, i.e. ETF -> II (my SIPP) -> me, or something else, i.e. can someone entity in the chain reclaim part or all of the withholding tax back?

Regards, Newroad

[clissold345]

... how does that work in practise - are they "looking through" to the ultimate holder, i.e. ETF -> II (my SIPP) -> me, or something else, i.e. can someone entity in the chain reclaim part or all of the withholding tax back?
...

Yes refund of the Dutch withholding tax (assuming withholding tax is taken) may only be possible if the shares are held in your name (not a nominee account).

A tax specialist should be able to answer all your questions. What about these people (though this page concerns exemptions not refunds)?

https://www.duijntax.com/en/dutch-divid ... exemption/

PS. If you get an answer please let us know.

[Newroad]

Hi Clissold345.

As a practical matter, if there were Withholding Tax taken which could not be reclaimed within a SIPP or ISA wrapper, that would rule it out for me as an option.

As noted, I'm not in any hurry (this is a medium term consideration for me) but I may well try and find out whether

(a) This is true for all Netherlands domiciled ETF's and similar, in which case, it would rule them all out for me, subject to the below, and if
(b) There is any means for the company with the nominee account (II for me) to reclaim the Withholding Tax and if so, on what basis

If I find anything unexpected out, I'll report back - but don't hold your breath.

Regards, Newroad

[BullDog]

Hi Clissold345.

As a practical matter, if there were Withholding Tax taken which could not be reclaimed within a SIPP or ISA wrapper, that would rule it out for me as an option.

As noted, I'm not in any hurry (this is a medium term consideration for me) but I may well try and find out whether

(a) This is true for all Netherlands domiciled ETF's and similar, in which case, it would rule them all out for me, subject to the below, and if
(b) There is any means for the company with the nominee account (II for me) to reclaim the Withholding Tax and if so, on what basis

If I find anything unexpected out, I'll report back - but don't hold your breath.

Regards, Newroad

I'm in the same boat. I have a SIPP with II and TDGB seems to tick a few boxes for me. Like you, withholding tax on an investment makes it a non starter. I might message II on Tuesday to see if they can throw any light on the situation. Thanks.

[Alaric]

Like you, withholding tax on an investment makes it a non starter. I might message II on Tuesday to see if they can throw any light on the situation. Thanks.

Another potential headache is that if they don't sell much to UK investors, they may not have bothered to prepare a KIID. But perhaps being subject to EU rules they would have to prepare something, even if it's only in Dutch. It's not that it contains information unavailable elswehere, but it has been made into a hurdle tby the FCA to be jumped by individual investors.

[Lootman]

Hi Clissold345.As a practical matter, if there were Withholding Tax taken which could not be reclaimed within a SIPP or ISA wrapper, that would rule it out for me as an option.

Like you, withholding tax on an investment makes it a non starter.

I can see how a withholding is annoying if you are investing only for dividends and yield.

But otherwise why would it matter? There are many attractive foreign funds and securities that have a low or zero yield, and then withholding doesn't matter. No British investor holding Berkshire Hathaway or a US tech ETF is going to care about that.

And in some cases you can offset that tax withholding against your tax liability on UK dividends.

[Newroad]

Hi Lootman.

I believe you haven't absorbed the original post and hence premise of this discussion.

Regards, Newroad

[1nvest]

it might be a reasonable strategy to just lump everything into VHYL

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-high-dividend-yield-ucits-etf-usd-distributing/distributions

and live off the dividends/distributions, currently around 3.26% - supplemented by the odd sale if needed.

Dividends are irrelevant other than for tax consideration purposes. Used to be that you could draw a £12K/year capital gain allowance each year as a tax efficient DIY dividend, but that's now declined to £3K, so involves more tax-loss harvesting as offset. If you're drawing the likes of a 5% SWR (DIY dividends of 5% of the start date portfolio value taken as income, where that amount is uplifted by inflation as subsequent years drawn income) taxation matters are a non-trivial matter. Dividend tax exempt allowance has also declined to just £500. Of the two and income drawn from capital gains in part (maybe fully) offset by capital losses is the potential better net choice, but that requires diversity (low/no/inverse correlations) rather than a single fund/ETF holding. Even more so if your combined/total income extends into the 40% tax band.

I note that TR26 Gilt https://www.yieldgimp.com/gilt-yields with its low coupon yield, so most of gains via tax exempt, are recently priced the the equivalent of a 7.2% yield based on a 40% rate taxpayer and as such might be included as part of the diversification depending upon personal circumstances.

Another factor is cash flows, DIY dividends to the amount and time of your own choosing is more fitting than variable dividends/times as defined by someone else.

[Newroad]

Hi 1nvest.

I have owned a chunk of T26 (which is what I assume you mean - TR26 does not exist as far as I'm aware) since September last year in my non tax-sheltered account. TN25 also.

However, a little like Lootman, your fairly generic information dump appears not to have absorbed the essential nature of the original post and its replies. This is not to say the idea in the original post is necessarily a good one - but it is the one being discussed.

Regards, Newroad