Dividend shares are ones that pay out income to shareholders. As an income investor, it’s one in all my major investing objectives to maximise the potential yield. Even although I’m based mostly within the UK, I’m free to spend money on firms exterior of the normal FTSE 100. So this received me considering. What if I purchased US-based dividend shares, so as to attempt to generate extra passive income than from their UK counterparts?
Measuring the dividend potential
Simply measuring a inventory by the dividend paid out per share isn’t the perfect metric to make use of. For instance, I may receives a commission 10p per share in income from two totally different dividend shares. One has a share value of 100p, the opposite has a share value of 1,000p.
From this viewpoint, I’d favor to obtain the 10p per share from the corporate with a decrease share value. This is as a result of the dividend is a bigger proportion of the share value. So by way of how a lot I must spend to purchase into the agency and entry the dividend, it’s rather more enticing.
The technical title for this instance is the dividend yield. This is the metric with which I’ll examine US shares to UK shares. It’s nonetheless not an ideal comparability as dividends change. The share value additionally adjustments every single day. But as the right resolution doesn’t exist, it’s the perfect match for the job.
Better dividend shares throughout the pond?
I’m going to match the FTSE 100 with the S&P 500 index. First up, let’s have a look at the common dividend yield throughout the entire index. For the FTSE 100 it’s 3% and for the S&P 500 it’s 1.69%. Clearly, the UK wins on this entrance. So if I didn’t need to particularly goal a specific dividend inventory, then the UK would supply me a higher dividend yield as a complete index.
If I wished to focus on the corporate providing me the very best yield, once more the UK comes out on high. The highest yield presently obtainable within the S&P is 7.58%, whereas within the FTSE 100 it’s 8.14%. Admittedly, there isn’t an enormous distinction right here, so each nations are viable choices for me.
An fascinating comparability is trying on the variety of firms which might be presently paying out dividends. For the S&P 500, 116 corporations aren’t paying dividends in the intervening time. So round 75% of the index are.
For the FTSE 100, there are 14 not paying out income, so 86% of the index are dividend shares. I can see that the S&P 500 index has many extra shares in it, so this is perhaps an influencing issue within the decrease determine.
Overall, it’s clear to me that the FTSE 100 remains to be the favoured marketplace for income traders like myself. Based on numerous totally different factors of view, I suppose that dividend shares within the UK supply me the perfect probability to maximise passive income potential.
Dividend stocks: can I make higher passive income from US companies?
