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International Shares, how do you define HIGH YIELD

General discussions about equity high-yield income strategies
Wizard
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International Shares, how do you define HIGH YIELD

#166671

Postby Wizard » September 16th, 2018, 10:31 am

Not sure if this comment was meant generally about the discussion of the US shares Gadge has highlighted or any one of them specifically. But surely we should not be judging these non-UK shares against a UK benchmark yield to determine if they are high yield or not. The US typically gives a lower yield, the Wall Street Journal gives an average yield figure of 2.06% for the Dow Industrial Average at present (not sure how calculated). So surely that c.2% is a more reasonable benchmark for a US listed share to be discussed here, because by definition the holder / buyer is specifically looking for US exposure.

If that is accepted then some shares in the posts above may not clear that hurdle rate, but more will clear that than applying a FTSE 100 average yield hurdle. However, taking this thinking one step further, as this is not an HYP board an investor may have a strategy that accepts individual shares below a hurdle rate as long as the portfolio overall beats that hurdle level. Such an approach would allow them to address matters such as explicitly balancing yield and capital growth which HYP does not.

So if, somebody were to start a thread on just Nvidia (continuing my example) it would clearly not be right for this board. But if the post was about a basket of US shares that overall beat the average yield of the Dow Industrial Average and included Nvidia then I would have thought that is perfectly legitimate to discuss that on this board.

It would be interesting to understand what others think.

Terry.

Moderator Message:
Edited. Good question on how do you define "high yield" in non-UK shares, moved from "International Shares as part of High yield Portfolio. Created Seperate thread. Raptor.

tjh290633
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Re: International Shares, how do you define HIGH YIELD

#166714

Postby tjh290633 » September 16th, 2018, 1:25 pm

I think that, if you are building a portfolio, exclusively with US shares, it does make sense to use a relevant hurdle rate. I am not so sure if this applies if you are mixing shares from different countries, because decisions on topping up, for example, may be distorted.

TJH

Wizard
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Re: International Shares, how do you define HIGH YIELD

#166729

Postby Wizard » September 16th, 2018, 3:23 pm

tjh290633 wrote:I think that, if you are building a portfolio, exclusively with US shares, it does make sense to use a relevant hurdle rate. I am not so sure if this applies if you are mixing shares from different countries, because decisions on topping up, for example, may be distorted.

TJH

By that logic presumably you would use the appropriate yield from the highest yielding market, rather than just defaulting to the UK?

Terry.

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Re: International Shares, how do you define HIGH YIELD

#166737

Postby tjh290633 » September 16th, 2018, 4:57 pm

Wizard wrote:
tjh290633 wrote:I think that, if you are building a portfolio, exclusively with US shares, it does make sense to use a relevant hurdle rate. I am not so sure if this applies if you are mixing shares from different countries, because decisions on topping up, for example, may be distorted.

TJH

By that logic presumably you would use the appropriate yield from the highest yielding market, rather than just defaulting to the UK?

Terry.

Logical. Alternatively use the median yield of your own holdings as the minimum yield for topping up. I.e., create your own individual index.

TJH

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Re: International Shares, how do you define HIGH YIELD

#166871

Postby Pastcaring » September 17th, 2018, 10:39 am

I don' t like silly acronyms but rules are rules

Local taxation needs to be taken into account,
IE different taxation treatment of dividend to capital gain.

In Australia it is tax advantaged to take dividends,thus high dividend yields.Some of my shares are on a gross yield of 9%.

In the US it is advantageous to take capital growth over dividends,thus low dividends.

This really distorts looking at yield only and using acronyms.

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Re: International Shares, how do you define HIGH YIELD

#166890

Postby Gengulphus » September 17th, 2018, 11:24 am

I basically find defining 'high yield' in a market-independent way rather too difficult a problem! And would suggest an alternative approach, namely to decide on the diversification by markets that you want, allocate your capital accordingly between them, and then choose a suitable level at which 'high yield' starts for each market.

Gengulphus

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Re: International Shares, how do you define HIGH YIELD

#168255

Postby Gadge » September 22nd, 2018, 10:26 pm

I think life is too short to worry about stuff like that so I just moved it :roll:

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Re: International Shares, how do you define HIGH YIELD

#168256

Postby Lootman » September 22nd, 2018, 10:30 pm

Pastcaring wrote:Local taxation needs to be taken into account, IE different taxation treatment of dividend to capital gain.

In Australia it is tax advantaged to take dividends,thus high dividend yields.Some of my shares are on a gross yield of 9%.

In the US it is advantageous to take capital growth over dividends,thus low dividends.

It is no longer true that the US taxes dividends higher than gains. The Bush tax cuts set the basic rate of tax at 15% for both.

I don't know much about Australia but recall reading somewhere that they tax unrealised gains, i.e. tax on a mark-to market basis. True?

ADrunkenMarcus
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Re: International Shares, how do you define HIGH YIELD

#168342

Postby ADrunkenMarcus » September 23rd, 2018, 11:45 am

Lootman wrote:I don't know much about Australia but recall reading somewhere that they tax unrealised gains, i.e. tax on a mark-to market basis. True?


If it is, it seems potty?

Best wishes

Mark.

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Re: International Shares, how do you define HIGH YIELD

#168392

Postby onslow » September 23rd, 2018, 3:17 pm

A lot of things in Australia could be considered potty, however this isnt one of them.

Australia does not tax unrealised capital gains. In fact, there is no capital gains tax on shares for non resident taxpayers(unless you hold > 10% of the company)

For income, there is a withholding tax (usually 15%) for non resident taxpayers. It varies, depending on the double taxation agreeement between Australia and the country where you are tax resident, and also depends if the dividend is considered "franked" or "unfranked"

https://www.ato.gov.au/Forms/You-and-yo ... 4/?page=14

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Re: International Shares, how do you define HIGH YIELD

#168447

Postby Hariseldon58 » September 23rd, 2018, 6:41 pm

As an aside, In the USA realised capital gains inside a fund or ETF are taxable and at the end of the year you get a certificate of income and realised gains from a fund holding. Clearly the U.K. approach of taxing the gains only when you sell the holding in the fund is beneficial!

Regarding the original question I would have thought High Yield must be relative to the investor and the ordinary usage of the word. If the yield of the All Share has averaged around 3.45% since 1996 and is around that level now, then this seems a reasonable marker to define something as High or Low.

If a market yields say around 1.5% eg a low cost USA or Japanese tracker then it’s hard to say that 2% is high yield when we simply look at it from the ordinary U.K. based investor, anything else is surely self deception.

With regard to the US, share buybacks are at a similar level to cash dividends and this rather artificially suggests a lower level of dividends than might otherwise be the case.

Pastcaring
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Re: International Shares, how do you define HIGH YIELD

#168497

Postby Pastcaring » September 24th, 2018, 2:33 am

Lootman wrote:
Pastcaring wrote:Local taxation needs to be taken into account, IE different taxation treatment of dividend to capital gain.

In Australia it is tax advantaged to take dividends,thus high dividend yields.Some of my shares are on a gross yield of 9%.

In the US it is advantageous to take capital growth over dividends,thus low dividends.

It is no longer true that the US taxes dividends higher than gains. The Bush tax cuts set the basic rate of tax at 15% for both.

I don't know much about Australia but recall reading somewhere that they tax unrealised gains, i.e. tax on a mark-to market basis. True?



To avoid getting too complicated dividends are taxed at the individual' s marginal rate Company tax is 30%.So if I receive $100K in grossed up dividends I receive $70K into my bank ,the $30K tax has gone to the tax office

When I do my tax at the end of the year my gross income is $100K,on which I have paid $30 K tax ( the company tax ).Working people would obviously pay that tax weekly.

The tax and medicare levy on $100K is approx $26--27K.So I would get say a $3K tax rebate.

For low paid people as the 30% tax paid on dividends is more than their marginal rate,they get a rebate.

IE someone has $12K in net income and does not work,they have a gross income of approx $17,500.The tax free bit is $18,200 annually so they would get the full $5,500 rebated.

CGT has no indexation,however to overcome that ,if the shares have been held for over one year ,then only half the gain is taxable.

IE on the $100K if I sell something ( never going to happen ) and make a $100K gain then $50 K is taxed at marginal rates.My gross income would be $150K, $50 K of the gain is tax free.I would need to pay the tax office money.In round numbers that $50 K would be taxed at 40%,so a $100K gain means $20K in tax.

I have no plans to sell anything so never pay CGT.The crossover point for dividend income is approx $140K.Have a gross income of $140K and the company tax paid on it means the tax office will never bother you

Thankfully I am well past that crossover point and get letters from the tax man saying cough up or we will kill you ( words to that effect )

Gadge
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Re: International Shares, how do you define HIGH YIELD

#170160

Postby Gadge » September 29th, 2018, 8:51 pm

It should be kept in mind that many International markets are not available to normal investors except by buying funds or ITs.

For example, I recently wanted to buy a share in Japan and was unable to do so on any of my 3 platforms.

Gadge

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Re: International Shares, how do you define HIGH YIELD

#170190

Postby DiamondEcho » September 30th, 2018, 12:53 am

re: Japan, depends who you trade through. With Interactive brokers for example it covers, the following JP exchanges:

'Online global trading Stocks: Japan
CHI-X Japan
JAPANNEXT
Tokyo Stock Exchange
https://www.interactivebrokers.co.uk/en ... php?f=1323

PeterGray
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Re: International Shares, how do you define HIGH YIELD

#171165

Postby PeterGray » October 3rd, 2018, 5:42 pm

Seconded. If you want to trade a wide range of international stocks then Interactive Brokers is the way to go. Their currency charges are a tiny fraction of most other brokers, and they cover a wide range of stocks from all the main international markets, and more.

Only downside is no ISAs, and a user platform that is aimed at people who know what they are doing.

Peter


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