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Foreign shares

General discussions about equity high-yield income strategies
MrFoolish
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Foreign shares

#463084

Postby MrFoolish » December 4th, 2021, 2:11 pm

Does anyone have any favourite foreign shares as part of a long term buy and hold portfolio?

I'm thinking:

- large, reliable company with solid earnings

- reasonable yield, probably 3% or above, at a sensible P/E

- easy to buy and hold; preferably exempt from significant withholding taxes

Would be happy with achieving 2 out of 3 of the above requirements.

Thanks in advance.

TUK020
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Re: Foreign shares

#463089

Postby TUK020 » December 4th, 2021, 2:32 pm

MrFoolish wrote:Does anyone have any favourite foreign shares as part of a long term buy and hold portfolio?

I'm thinking:

- large, reliable company with solid earnings

- reasonable yield, probably 3% or above, at a sensible P/E

- easy to buy and hold; preferably exempt from significant withholding taxes

Would be happy with achieving 2 out of 3 of the above requirements.

Thanks in advance.

Murray International MYI
Henderson Far East HFEL
Middlefield Canadian MCT
all I.T.s with significant foreign composition

MrFoolish
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Re: Foreign shares

#463097

Postby MrFoolish » December 4th, 2021, 3:00 pm

TUK020 wrote:
MrFoolish wrote:Does anyone have any favourite foreign shares as part of a long term buy and hold portfolio?

I'm thinking:

- large, reliable company with solid earnings

- reasonable yield, probably 3% or above, at a sensible P/E

- easy to buy and hold; preferably exempt from significant withholding taxes

Would be happy with achieving 2 out of 3 of the above requirements.

Thanks in advance.

Murray International MYI
Henderson Far East HFEL
Middlefield Canadian MCT
all I.T.s with significant foreign composition


Thanks but I already hold ITs with significant foreign composition. I was pondering adding a couple of direct holdings to avoid the management fees, and because it's sort of a hobby. Looking for low risk solid plodders - like a foreign Unilever I suppose.

Lootman
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Re: Foreign shares

#463104

Postby Lootman » December 4th, 2021, 3:09 pm

MrFoolish wrote: was pondering adding a couple of direct holdings to avoid the management fees, and because it's sort of a hobby. Looking for low risk solid plodders - like a foreign Unilever I suppose.

Nestles and Proctor & Gamble are the most similar to Unilever I would guess.

But to my mind the real point of going overseas is to get the kind of exposure that you cannot get with UK large-cap shares e.g. IT, biotech, autos, heavy industrials, chipmakers, chemicals etc.

One approach to holding foreign shares individually is to restrict yourself to the US market. Because as well as obviously including all the US shares, there are also ADRs for all the major non-US companies e.g. Nestles, Toyota, Siemens, Novartis etc.

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Re: Foreign shares

#463125

Postby SalvorHardin » December 4th, 2021, 4:46 pm

Foreign low risk solid plodders which yield more than 3%? I'm sounding like a broken record, but the big Canadian banks fit the bill admirably. For one thing, none of these have cut their dividends since 1940 (British banks, ROTFLMAO by comparison!)

Bank of Montreal is my pick, its dividend was raised 25% yesterday. Discussion below:

https://lemonfool.co.uk/viewtopic.php?f=31&t=23185

The more reliable foreign companies tend to yield below 3%. IMHO the North American railroads are spectacular long term holds, the UK has nothing like them. But they all yield less than 3%

You could try some of the American REITs/Property companies. SL Green is big in prime Manhattan offices, yielding 5.1%. But there's coronavirus and work from home risk, as well as Democrat-run City authorities increasingly tolerating arson, looting and other property crimes.

For example, San Francisco and parts of Los Angeles have effectively decriminalised theft from shops if you steal items worth less than $950. Not good for commercial companies in these areas:

https://www.hoover.org/research/why-shoplifting-now-de-facto-legal-california

As to withholding taxes, most countries impose these on dividends (Britain is an exception). But you can offset foreign withholding tax against your UK taxes. American withholding is just 15% once you complete the W-8BEN form

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Re: Foreign shares

#463183

Postby tjh290633 » December 4th, 2021, 11:13 pm

One or two of mine started out as UK shares but I have ended up with foreign ones. I am thinking of BHP and South32, in particular. Some coming the other way like Shell and ULVR.

As long as I can hold them in my ISA, I am not bothered. I can recall discussions back in TMF days about certain mining shares that were not UK resident and the tax hassle that they could cause.

TJH

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Re: Foreign shares

#463240

Postby dealtn » December 5th, 2021, 12:29 pm

Unilever ticks that 3/3 box for me. Others in my portfolio would be 2/3.

(Foreign for me is source of earnings and cashflow. Where it is listed is irrelevant to me from the perspective of business valuation, although taxation and potential trading costs are relevant.)

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Re: Foreign shares

#463255

Postby Dod101 » December 5th, 2021, 1:09 pm

dealtn wrote:Unilever ticks that 3/3 box for me. Others in my portfolio would be 2/3.

(Foreign for me is source of earnings and cashflow. Where it is listed is irrelevant to me from the perspective of business valuation, although taxation and potential trading costs are relevant.)


I think it is more than that. Foreign listings will often attract an entirely different culture, some good some not so good but at least it is different. Look around the UK companies. They mostly have much the same outlook on business and often the same or very similar non Execs in situ.

It is not just foreign earnings that I think are worth having.

Dod

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Re: Foreign shares

#463281

Postby dealtn » December 5th, 2021, 2:13 pm

Dod101 wrote:
dealtn wrote:Unilever ticks that 3/3 box for me. Others in my portfolio would be 2/3.

(Foreign for me is source of earnings and cashflow. Where it is listed is irrelevant to me from the perspective of business valuation, although taxation and potential trading costs are relevant.)


I think it is more than that. Foreign listings will often attract an entirely different culture, some good some not so good but at least it is different. Look around the UK companies. They mostly have much the same outlook on business and often the same or very similar non Execs in situ.

It is not just foreign earnings that I think are worth having.

Dod


Yes there is merit in that I think. It depends though on what you are trying to achieve from an investment I guess. There are a number of attractions to a UK listing. The UK legal system, and relatively non-interference in operating here are two. Constant relative under-pricing (it seems) is also another, at least for Investment Strategies I practice (and quite probably true for other investors here, but for other reasons such as the availability of High Yields). The relative attractiveness to overseas buyers, and the resulting takeover approaches, making significant and often short-term Capital profits, are certainly beneficial.

No doubt there are similar, but different attractive qualities from other listings overseas.

Dod101
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Re: Foreign shares

#463295

Postby Dod101 » December 5th, 2021, 3:36 pm

dealtn wrote:
Dod101 wrote:
dealtn wrote:Unilever ticks that 3/3 box for me. Others in my portfolio would be 2/3.

(Foreign for me is source of earnings and cashflow. Where it is listed is irrelevant to me from the perspective of business valuation, although taxation and potential trading costs are relevant.)


I think it is more than that. Foreign listings will often attract an entirely different culture, some good some not so good but at least it is different. Look around the UK companies. They mostly have much the same outlook on business and often the same or very similar non Execs in situ.

It is not just foreign earnings that I think are worth having.

Dod


Yes there is merit in that I think. It depends though on what you are trying to achieve from an investment I guess. There are a number of attractions to a UK listing. The UK legal system, and relatively non-interference in operating here are two. Constant relative under-pricing (it seems) is also another, at least for Investment Strategies I practice (and quite probably true for other investors here, but for other reasons such as the availability of High Yields). The relative attractiveness to overseas buyers, and the resulting takeover approaches, making significant and often short-term Capital profits, are certainly beneficial.

No doubt there are similar, but different attractive qualities from other listings overseas.


I think it is more than these factors and the over riding one to me is culture (about which I go on and few seem to understand) As I said, one UK Boardroom seems at least from the outside to be like another. You can get most I think of the UK benefits of the legal system, regulation and so on, in the US, Canada and give or take, in Continental Europe. The US is much more entrepreneurial I think and appears to be prepared to accept failure more readily. I am not personally that concerned about high yields although I will always hold high yield investments as I need the income. I totally discount any attraction in takeover approaches because at best, that is a one time gain and almost by definition the companies being taken over are undervalued and often quite attractive long term investments.

Dod

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Re: Foreign shares

#463322

Postby OLTB » December 5th, 2021, 5:42 pm

Earlier this year I bought Pepsi and Yum Brands in the US - hopefully the world will still buy fizzy drinks and Kentucky Fried Chicken for a while yet. Not really high yields, but should be steady growth no matter what the economy.

Cheers, OLTB.

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Re: Foreign shares

#463388

Postby 1nvest » December 6th, 2021, 8:24 am

The broad average (global) withholding tax is around 20%. 30% for the US, reduced to 15% under UK/US treaty if the UK individual is known/declared to the US (via a W8-BEN). No withholding tax is applied by the US if being paid to a pension scheme (SIPP).

Issues are that you cannot hold foreign currencies inside a ISA/SIPP so each dividend will be converted to £ at a cost (maybe 1.5% such as in the case of ii brokerage for amounts less than £25K), and again back to $ again if you re-invest the dividends (3% round trip cost). As such accumulation funds are more preferred inside ISA/SIPP. Another issue is US Estate Tax (death duties/inheritance tax), whilst the exemption allowance again under US/UK tax treaty is generous, north of $10M IIRC (outside of most individual investors) the estate assets will be frozen/unavailable until you (or a solicitor/accountant) have gone through the reporting/release process if the amounts involved are over around $64K (again from memory, too lazy to google it). If not reported and reported correctly you (or rather your heirs) could end up with a sizeable US tax liability, and it can be tricky i.e. you have to use the precisely correct form at the time of the death to report otherwise the registration is dropped and the estate becomes liable for full taxation.

So consider a case of a 3% dividend yield stock, that is reduced by 15% US withholding tax to 2.55% that then incurs a 1.5% FX (currency) conversion cost (down to 2.51%) because of being held in a ISA, and where you reinvest those dividends and again pay another 1.5% = 2.47% net reinvested, less maybe a £10 broker fee. And also, if you die, and your partner doesn't correctly report/file the relevant US forms in a timely manner that might otherwise have exempted US Estate tax, then the US may/will hunt down the non-payment of US taxes along with penalties.

As such the broad preference is to hold US stock exposure via a fund (that can't die, only maybe close) in a location with reasonable US tax treaty (i.e. Ireland has the same 15% US withholding tax arrangement as the UK), and/or holdings that pay low dividends and are accumulating (to avoid multiple currency conversion costs). Where the tendency is towards low dividends. US investors equally saw dividends being more highly taxed as of the mid 1980's and as such most firms prefer to pay low dividends/repurchase stock (so generally faster price appreciation than if dividends were paid).

Yet another factor is that many states don't like funds for the very reason that the can avoid taxes that otherwise might be paid (received) and as such they are making it increasingly difficult for such funds, at least for those outside of their own realm/control. If those extend to a level where funds close down their product then that could leave you with a large capital gain tax liability in being liquidated into cash.

In short, be mindful of the incidental risks/costs/taxes when investing in foreign shares/funds.

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Re: Foreign shares

#463390

Postby Dod101 » December 6th, 2021, 8:38 am

1nvest wrote:Issues are that you cannot hold foreign currencies inside a ISA/SIPP so each dividend will be converted to £ at a cost (maybe 1.5% such as in the case of ii brokerage for amounts less than £25K), and again back to $ again if you re-invest the dividends (3% round trip cost). As such accumulation funds are more preferred inside ISA/SIPP. Another issue is US Estate Tax (death duties/inheritance tax), whilst the exemption allowance again under US/UK tax treaty is generous, north of $10M IIRC (outside of most individual investors) the estate assets will be frozen/unavailable until you (or a solicitor/accountant) have gone through the reporting/release process if the amounts involved are over around $64K (again from memory, too lazy to google it). If not reported and reported correctly you (or rather your heirs) could end up with a sizeable US tax liability, and it can be tricky i.e. you have to use the precisely correct form at the time of the death to report otherwise the registration is dropped and the estate becomes liable for full taxation.

S


In my SIPP which is with II, my dividends from Toronto Dominion Bank are paid in Canadian Dollars (not surprisingly) and are held in these dollars so instead of incurring any costs for conversion, I buy more shares once a year, so in my experience 1nvest is not quite correct.

Dod

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Re: Foreign shares

#463395

Postby 1nvest » December 6th, 2021, 9:07 am

Dod101 wrote:
1nvest wrote:Issues are that you cannot hold foreign currencies inside a ISA/SIPP so each dividend will be converted to £ at a cost (maybe 1.5% such as in the case of ii brokerage for amounts less than £25K), and again back to $ again if you re-invest the dividends (3% round trip cost). As such accumulation funds are more preferred inside ISA/SIPP. Another issue is US Estate Tax (death duties/inheritance tax), whilst the exemption allowance again under US/UK tax treaty is generous, north of $10M IIRC (outside of most individual investors) the estate assets will be frozen/unavailable until you (or a solicitor/accountant) have gone through the reporting/release process if the amounts involved are over around $64K (again from memory, too lazy to google it). If not reported and reported correctly you (or rather your heirs) could end up with a sizeable US tax liability, and it can be tricky i.e. you have to use the precisely correct form at the time of the death to report otherwise the registration is dropped and the estate becomes liable for full taxation.

S


In my SIPP which is with II, my dividends from Toronto Dominion Bank are paid in Canadian Dollars (not surprisingly) and are held in these dollars so instead of incurring any costs for conversion, I buy more shares once a year, so in my experience 1nvest is not quite correct.

Dod

Thanks Dod. I don't have a SIPP and wasn't aware that foreign currencies could be held inside a SIPP. Thought they were the same as ISA, but obviously not.

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Re: Foreign shares

#463424

Postby MaraMan » December 6th, 2021, 10:47 am

In Terry Smith's latest sermon he made a strong case for lift manufacterers such as Kone. Maybe worth considering?

MM

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Re: Foreign shares

#463456

Postby Dod101 » December 6th, 2021, 11:47 am

1nvest wrote:
Dod101 wrote:
1nvest wrote:Issues are that you cannot hold foreign currencies inside a ISA/SIPP so each dividend will be converted to £ at a cost (maybe 1.5% such as in the case of ii brokerage for amounts less than £25K), and again back to $ again if you re-invest the dividends (3% round trip cost). As such accumulation funds are more preferred inside ISA/SIPP. Another issue is US Estate Tax (death duties/inheritance tax), whilst the exemption allowance again under US/UK tax treaty is generous, north of $10M IIRC (outside of most individual investors) the estate assets will be frozen/unavailable until you (or a solicitor/accountant) have gone through the reporting/release process if the amounts involved are over around $64K (again from memory, too lazy to google it). If not reported and reported correctly you (or rather your heirs) could end up with a sizeable US tax liability, and it can be tricky i.e. you have to use the precisely correct form at the time of the death to report otherwise the registration is dropped and the estate becomes liable for full taxation.

S


In my SIPP which is with II, my dividends from Toronto Dominion Bank are paid in Canadian Dollars (not surprisingly) and are held in these dollars so instead of incurring any costs for conversion, I buy more shares once a year, so in my experience 1nvest is not quite correct.

Dod

Thanks Dod. I don't have a SIPP and wasn't aware that foreign currencies could be held inside a SIPP. Thought they were the same as ISA, but obviously not.


Likewise I did not realise that they were not allowed to be held in an ISA. Might have to reconsider my plans.

Dod

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Re: Foreign shares

#463468

Postby Alaric » December 6th, 2021, 12:39 pm

1nvest wrote: I don't have a SIPP and wasn't aware that foreign currencies could be held inside a SIPP. Thought they were the same as ISA, but obviously not.


Another difference with SIPPs is that being under pensions legislation, withholding taxes can be reduced to zero with the right paperwork. Tax treaties may have exemptions for assets classed as "pensions". That applies to USA/UK.

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Re: Foreign shares

#463506

Postby kempiejon » December 6th, 2021, 2:12 pm

MaraMan wrote:In Terry Smith's latest sermon he made a strong case for lift manufacterers such as Kone. Maybe worth considering?

MM

ADrunkenMarcus of this parish was an advocate viewtopic.php?f=93&t=25400&p=459097&hilit=kone#p450364

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Re: Foreign shares

#463568

Postby Charlottesquare » December 6th, 2021, 5:17 pm

MaraMan wrote:In Terry Smith's latest sermon he made a strong case for lift manufacterers such as Kone. Maybe worth considering?

MM



I would have expected their performance to be a bit up and down.

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Re: Foreign shares

#463614

Postby TwmSionCati » December 6th, 2021, 7:05 pm

Does anyone have any favourite foreign shares as part of a long term buy and hold portfolio?


My favourite is Proximus, a Belgian telecom outfit: its most appealing characteristic is that the Belgian State holds more than half the shares. MarCap €5.6bn, P/E around 12, yield in the range 4-8% in the last 5 years and around 7% at the moment, covered 1.4x. The yield is reduced by withholding tax, tho' not much: I’ve had 6¼% on average over the last decade. (No tax hassles, as TJH insinuates, either — you simply fill in a form every 5 years, post it, and wait for the refund.)

Don’t bother with France, Italy or Spain: all have high rates of withholding tax, and make it impossibly difficult to recover even the portion you're entitled to.

Its worth looking at the Finns, because all the withholding tax is refunded (again, no hassles). ADrunkenMarcus likes Kone, but I prefer UPM Kymmene (MarCap €17.4bn; P/E around 16; yield 3-6%, now 4%, covered 1.9x) and Orion (MarCap €5.0bn; P/E around 26; yield 3-6%, now 3¼%, but covered only 1.1x).

Other Scandis might be worthwhile as well, tho’ I haven’t explored them.

General advice at https://the-international-investor.com.

TSC


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