Disclaimer: This is not financial advice! No warranty.
When selecting ETFs, various factors come into play, including tax considerations. In the last article, we discussed what partial exemption means. However, the tax differences between ETFs with different domiciles and their holdings in US stocks are also interesting. This article focuses on two specific and popular ETFs, and even though both contain US stocks, that doesn’t necessarily mean that the ETF domiciled in Ireland will deliver higher returns.
The Candidates
The Vanguard FTSE All-World High Dividend is a classic among dividend ETFs. It is broadly diversified across regions and industries with over 2,000 stocks. What makes it particularly interesting is the dividend growth and its general performance, independent of dividends. The iShares ETF, on the other hand, contains only 100 stocks, but it is also popular among investors following a dividend strategy. Here are the details for each ETF in an overview:
- Vanguard FTSE All-World High Dividend Yield UCITS ETF USD Distributing, domiciled in Ireland (ISIN: IE00B8GKDB10)
- US share: over 43%
- TER (Total Expense Ratio): 0.29%
- Dividend yield: around 3%
- Contains over 2,000 stocks
- iShares STOXX Global Select Dividend 100 UCITS, domiciled in Germany (ISIN: DE000A0F5UH1)
- US share: just under 20%
- TER: 0.46%
- Dividend yield: over 5%
- Contains 100 stocks, as the name suggests
The iShares ETF is more expensive than the Vanguard and is domiciled in Germany, but it offers a higher dividend yield. The Vanguard, domiciled in Ireland, benefits from a double taxation agreement with the US, which reduces the withholding tax on dividends from 30% to 15%. ETFs domiciled in Germany, however, are subject to the full 30% US withholding tax on dividends.
These differences can significantly impact the net returns of the ETFs. However, the withholding tax is not visible to end investors, as it is directly handled by the ETF provider. To see a difference, one would need to find two ETFs that hold exactly the same stocks, with one domiciled in Ireland and the other, for example, in Germany. I haven’t found such an ETF, likely because most ETFs with a higher US share have moved to Ireland.
Instead, I selected the iShares ETF because it contains a particular feature. Its 100 positions are almost entirely included in the Vanguard (94, if I haven’t miscounted; I’ve attached a table of matching positions below). In other words, the iShares ETF overweights some positions from the Vanguard, leading to a higher dividend yield. The iShares ETF doesn’t provide further diversification but instead places a stronger emphasis on certain stocks, like Pfizer and Verizon. The ETF is not representative of the entire market but is weighted according to the top dividend payers. These stocks are not only located in the United States, which is why the US share is lower than in the Vanguard.
Would you get even higher dividends if the ETF were domiciled in Ireland? Yes, but we’re talking about just a few cents. So, it depends on the proportion of US stocks in the ETF, but also on the overall return.
| Ticker | Name.x | Name.y | iShares | Vanguard | Standort |
|---|---|---|---|---|---|
| 1308 | sitc international holdings ltd | sitc international holdings co ltd | 4,55 | 0,0113 | Hongkong |
| YAL | yancoal australia ltd | yancoal australia ltd | 2,41 | 0,0049 | Australien |
| NHC | new hope corporation ltd | new hope corp ltd | 2,04 | 0,006 | Australien |
| NWG | natwest group plc | natwest group plc | 1,86 | 0,0847 | Vereinigtes Königreich |
| ABN | abn amro bank nv | abn amro bank nv | 1,81 | 0,0259 | Niederlande |
| INGA | ing groep nv | ing groep nv | 1,79 | 0,181 | Niederlande |
| HSBA | hsbc holdings plc | hsbc holdings plc | 1,70 | 0,5543 | Vereinigtes Königreich |
| 12 | henderson land development ltd | henderson land development co ltd | 1,56 | 0,0118 | Hongkong |
| BEN | bendigo and adelaide bank ltd | franklin resources inc | 1,53 | 0,0225 | Australien |
| BEN | bendigo and adelaide bank ltd | bendigo & adelaide bank ltd | 1,53 | 0,0153 | Australien |
| LGEN | legal and general group plc | legal & general group plc | 1,46 | 0,0593 | Vereinigtes Königreich |
| 868 | xinyi glass holdings ltd | xinyi glass holdings ltd | 1,43 | 0,0088 | Hongkong |
| NN | nn group nv | nn group nv | 1,42 | 0,0436 | Niederlande |
| PKN | orlen sa | orlen sa | 1,41 | 0,0333 | Polen |
| UOB | united overseas bank ltd | united overseas bank ltd | 1,33 | 0,0937 | Singapur |
| BNP | bnp paribas sa | bnp paribas sa | 1,31 | 0,218 | Frankreich |
| RIO | rio tinto plc | rio tinto plc | 1,30 | 0,2395 | Vereinigtes Königreich |
| RIO | rio tinto plc | rio tinto ltd | 1,30 | 0,0997 | Vereinigtes Königreich |
| 288 | wh group ltd | wh group ltd | 1,30 | 0,0169 | Hongkong |
| AKRBP | aker bp | aker bp asa | 1,25 | 0,0257 | Norwegen |
| AGS | ageas sa | ageas sa/nv | 1,23 | 0,0252 | Belgien |
| WDS | woodside energy group ltd | woodside energy group ltd | 1,22 | 0,1206 | Australien |
| 6 | power assets holdings ltd | power assets holdings ltd | 1,21 | 0,0246 | Hongkong |
| FMG | fortescue ltd | fortescue ltd | 1,18 | 0,0783 | Australien |
| ASRNL | asr nederland nv | asr nederland nv | 1,18 | 0,0232 | Niederlande |
| PST | poste italiane | poste italiane spa | 1,11 | 0,0193 | Italien |
| ACA | credit agricole sa | credit agricole sa | 1,05 | 0,0475 | Frankreich |
| 6417 | sankyo ltd | sankyo co ltd | 1,02 | 0,0059 | Japan |
| NAB | national australia bank ltd | national australia bank ltd | 1,02 | 0,2577 | Australien |
| 1113 | ck asset holdings ltd | ck asset holdings ltd | 1,00 | 0,0245 | Hongkong |
| ELE | endesa sa | endesa sa | 0,99 | 0,0193 | Spanien |
| 16 | sun hung kai properties ltd | sun hung kai properties ltd | 0,98 | 0,0419 | Hongkong |
| SDF | k s n ag | steadfast group ltd | 0,97 | 0,0165 | Deutschland |
| BMW3 | bmw pref ag | bayerische motoren werke ag | 0,97 | 0,0171 | Deutschland |
| PFE | pfizer inc | pfizer inc | 0,96 | 0,5398 | Vereinigte Staaten |
| JBH | jb hi-fi ltd | jb hi-fi ltd | 0,96 | 0,0152 | Australien |
| ORA | orange sa | orange sa | 0,95 | 0,0658 | Frankreich |
| ORA | orange sa | orora ltd | 0,95 | 0,0063 | Frankreich |
| RIO | rio tinto ltd | rio tinto plc | 0,94 | 0,2395 | Australien |
| RIO | rio tinto ltd | rio tinto ltd | 0,94 | 0,0997 | Australien |
| 2 | clp holdings ltd | clp holdings ltd | 0,92 | 0,0463 | Hongkong |
| CFG | citizens financial group inc | citizens financial group inc | 0,92 | 0,0562 | Vereinigte Staaten |
| IP | international paper | international paper co | 0,91 | 0,0509 | Vereinigte Staaten |
| VZ | verizon communications inc | verizon communications inc | 0,90 | 0,5921 | Vereinigte Staaten |
| SRG | snam | snam spa | 0,90 | 0,0334 | Italien |
| 2914 | japan tobacco inc | japan tobacco inc | 0,88 | 0,1081 | Japan |
| VOW3 | volkswagen non-voting pref ag | volkswagen ag | 0,88 | 0,0714 | Deutschland |
| MBG | mercedes-benz group n ag | mercedes-benz group ag | 0,88 | 0,1981 | Deutschland |
| SUN | suncorp group ltd | suncorp group ltd | 0,85 | 0,0491 | Australien |
| BNS | bank of nova scotia | bank of nova scotia/the | 0,84 | 0,189 | Kanada |
| KEY | keycorp | keycorp | 0,83 | 0,0453 | Vereinigte Staaten |
| HOLN | holcim ltd ag | holcim ag | 0,83 | 0,1684 | Schweiz |
| CM | canadian imperial bank of commerce | canadian imperial bank of commerce | 0,83 | 0,1513 | Kanada |
| 17 | new world development company ltd | new world development co ltd | 0,82 | 0,0044 | Hongkong |
| RF | regions financial corp | regions financial corp | 0,80 | 0,062 | Vereinigte Staaten |
| RF | regions financial corp | eurazeo se | 0,80 | 0,0046 | Vereinigte Staaten |
| HVN | harvey norman holdings ltd | harvey norman holdings ltd | 0,79 | 0,0061 | Australien |
| CEN | contact energy ltd | contact energy ltd | 0,78 | 0,0149 | Neuseeland |
| MFC | manulife financial corp | manulife financial corp | 0,77 | 0,1639 | Kanada |
| ALV | allianz | allianz se | 0,77 | 0,369 | Deutschland |
| ALV | allianz | autoliv inc | 0,77 | 0,0265 | Deutschland |
| DVN | devon energy corp | devon energy corp | 0,74 | 0,1022 | Vereinigte Staaten |
| POW | power corporation of canada | power corp of canada | 0,74 | 0,0515 | Kanada |
| CAG | conagra brands inc | conagra brands inc | 0,71 | 0,0465 | Vereinigte Staaten |
| HBAN | huntington bancshares inc | huntington bancshares inc/oh | 0,71 | 0,0641 | Vereinigte Staaten |
| TD | toronto dominion | toronto-dominion bank/the | 0,69 | 0,3319 | Kanada |
| BBY | best buy co inc | best buy co inc | 0,69 | 0,0626 | Vereinigte Staaten |
| ZURN | zurich insurance group ag | zurich insurance group ag | 0,68 | 0,2627 | Schweiz |
| DUK | duke energy corp | duke energy corp | 0,68 | 0,263 | Vereinigte Staaten |
| 1808 | haseko corp | haseko corp | 0,67 | 0,0105 | Japan |
| RY | royal bank of canada | royal bank of canada | 0,67 | 0,5109 | Kanada |
| SO | southern | southern co/the | 0,66 | 0,2877 | Vereinigte Staaten |
| BMO | bank of montreal | bank of montreal | 0,66 | 0,2072 | Kanada |
| LYB | lyondellbasell industries nv class | lyondellbasell industries nv | 0,65 | 0,0853 | Vereinigte Staaten |
| FANG | diamondback energy inc | diamondback energy inc | 0,65 | 0,122 | Vereinigte Staaten |
| USB | us bancorp | us bancorp | 0,65 | 0,2095 | Vereinigte Staaten |
| ETR | entergy corp | entergy corp | 0,65 | 0,078 | Vereinigte Staaten |
| FITB | fifth third bancorp | fifth third bancorp | 0,63 | 0,0856 | Vereinigte Staaten |
| HPQ | hp inc | hp inc | 0,62 | 0,1168 | Vereinigte Staaten |
| GILD | gilead sciences inc | gilead sciences inc | 0,60 | 0,2911 | Vereinigte Staaten |
| 5401 | nippon steel corp | nippon steel corp | 0,59 | 0,0597 | Japan |
| F | ford motor co | ford motor co | 0,58 | 0,1685 | Vereinigte Staaten |
| CVX | chevron corp | chevron corp | 0,58 | 0,9175 | Vereinigte Staaten |
| SLF | sun life financial inc | sun life financial inc | 0,56 | 0,0975 | Kanada |
| 5411 | jfe holdings inc | jfe holdings inc | 0,56 | 0,0287 | Japan |
| ED | consolidated edison inc | consolidated edison inc | 0,55 | 0,1064 | Vereinigte Staaten |
| AMGN | amgen inc | amgen inc | 0,54 | 0,5699 | Vereinigte Staaten |
| FNF | fidelity national financial inc | fidelity national financial inc | 0,53 | 0,0442 | Vereinigte Staaten |
| SRE | sempra | sempra | 0,52 | 0,1626 | Vereinigte Staaten |
| COP | conocophillips | conocophillips | 0,49 | 0,456 | Vereinigte Staaten |
| IBM | international business machines co | international business machines corp | 0,47 | 0,5408 | Vereinigte Staaten |
| PFG | principal financial group inc | principal financial group inc | 0,47 | 0,0622 | Vereinigte Staaten |
| CTRA | coterra energy inc | coterra energy inc | 0,43 | 0,0669 | Vereinigte Staaten |
| PSX | phillips | phillips 66 | 0,38 | 0,2034 | Vereinigte Staaten |