Author Topic: Any broad market ETFs with no dividend payouts  (Read 889 times)

MoneyTree

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Any broad market ETFs with no dividend payouts
« on: April 04, 2019, 12:52:25 AM »
Is there such a thing as a broad market etf or mutual fund with no dividend payouts? Iíve been trying to shift to a lower dividend portfolio for tax purposes, but havenít been able to find something like this.

Closest thing Iíve found is brk-b, but donít feel comfortable with investing more than a certain percentage of my assets in a single company.

JohnnyZ

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Re: Any broad market ETFs with no dividend payouts
« Reply #1 on: April 04, 2019, 04:52:14 AM »
No idea if it's available everywhere, but there's this one:
https://www.justetf.com/en/etf-profile.html?isin=LU1681043599
but it has high fees compared to what US investors are used to (0.38%) and doesn't include the US.

FIPurpose

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Re: Any broad market ETFs with no dividend payouts
« Reply #2 on: April 04, 2019, 06:35:32 AM »
brk-b is a mutual fund.

But ETF's by definition have to pay out all the dividends they receive from their holdings. So any ETF that you buy without dividends is going to be removing you from a part of the market. Maybe you'll just want to reallocate your holdings between your taxable and retirement accounts.

Andy R

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Re: Any broad market ETFs with no dividend payouts
« Reply #3 on: April 04, 2019, 06:56:02 AM »
No idea if it's available everywhere, but there's this one:
https://www.justetf.com/en/etf-profile.html?isin=LU1681043599
but it has high fees compared to what US investors are used to (0.38%) and doesn't include the US.

Residents of certain countries still have to pay tax on the accumulation of dividends for the European accumulation funds and I suspect that is the case for US residents.

I vaguely recall hearing about problems with US people investing in EU funds but I didn't take notice as it didn't affect me.

Car Jack

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Re: Any broad market ETFs with no dividend payouts
« Reply #4 on: April 04, 2019, 07:17:33 AM »
The tough part is that even if an ETF existed (I'm sure one does), since it's not main stream, the ER is going to be high.  I would agree that BRK/B is a reasonable stand in.  I hold some myself, looking ahead to retirement soon.  I'm still torn, though.  In my state, taxes on cap gains are more than double what they are on dividends.  So strategies to deal with federal taxes don't help.

EvenSteven

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Re: Any broad market ETFs with no dividend payouts
« Reply #5 on: April 04, 2019, 08:34:34 AM »
I believe all funds must, by law, pay out dividends that the fund receives. So if the fund owns any dividend paying stocks, they are required to pay that dividend to the fund shareholder. Could you consider a fund that excludes any and all stocks that pay a dividend to be a "broad market" ETF?

flipboard

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Re: Any broad market ETFs with no dividend payouts
« Reply #6 on: April 04, 2019, 10:01:30 AM »
No idea if it's available everywhere, but there's this one:
https://www.justetf.com/en/etf-profile.html?isin=LU1681043599
but it has high fees compared to what US investors are used to (0.38%) and doesn't include the US.

Residents of certain countries still have to pay tax on the accumulation of dividends for the European accumulation funds and I suspect that is the case for US residents.

I vaguely recall hearing about problems with US people investing in EU funds but I didn't take notice as it didn't affect me.
US people indeed to have issues here: they're subjec to a protectionist tax punishment if they buy a foreign fund, AKA the "PFIC" tax. It involves things like completing an overly complicated form (estimated to take 40 hours to complete), and paying the top marginal tax rate on both dividends and gains every year. So not only are they not dodging tax on dividends (since the gains get taxed), they're actually boosting tax AND wasting time on paperwork.

Which leaves US-based accumulating funds based in the USA - but they don't exist.

Meanwhile, where I live in Europe: accumulating funds are indeed taxed on their retained dividends. The advantage is you wouldn't have to reinvest / you get fewer transactions, but it's not a big deal. I suppose if you live in a country with dividend withholding, then accumulating funds are nice since you'd avoid the withholding (no overall tax benefit, you'd just pay it later).
« Last Edit: April 04, 2019, 10:04:38 AM by flipboard »

Lucky Penny Acres

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Re: Any broad market ETFs with no dividend payouts
« Reply #7 on: April 04, 2019, 10:51:20 AM »
U.S. mutual funds or ETFs must pay out at least 90% of their income (e.g., dividends and capital gains received by the fund) each year to be taxed as registered investment companies. If a mutual fund fails to pay out at least 90%, then the mutual fund itself would be taxed as a corporation on its income and there would then be double taxation for investors.

Further, if a mutual fund fails to distribute out 98% of its ordinary income and 98.2% of its capital gains each year, the fund is required to pay an excise tax on any amounts of income below those thresholds.

As a result of those tax consequences to the fund, most funds pay out over the 98% of the fund's income each year and basically all pay out over the 90% (with some funds choosing to incur the small excise tax for some amount between 90% and 98% but retain the extra income in the fund as they believe their investments earn more than the tax costs).

To find a mutual fund / ETF that doesn't pay out any dividends, you would need to invest in an ETF that doesn't invest in any stocks that pay dividends to the fund. There may be some out there that have very low dividend payouts if they focus on certain sectors or on growth companies that aren't paying dividends.

Proud Foot

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Re: Any broad market ETFs with no dividend payouts
« Reply #8 on: April 04, 2019, 03:28:22 PM »
Is there such a thing as a broad market etf or mutual fund with no dividend payouts? Iíve been trying to shift to a lower dividend portfolio for tax purposes, but havenít been able to find something like this.

Closest thing Iíve found is brk-b, but donít feel comfortable with investing more than a certain percentage of my assets in a single company.

Keep in mind the taxation surrounding Qualified Dividends. A broad market ETF/Mutual fund such as VTI/VTSAX has a dividend rate of right under 2% and I believe most, if not all, of their dividend is Qualified and receives is taxed at Capital Gains rates. (I do not hold any in a taxable account so someone who does may need to confirm this)
« Last Edit: April 04, 2019, 03:35:53 PM by Proud Foot »

MoneyTree

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Re: Any broad market ETFs with no dividend payouts
« Reply #9 on: April 04, 2019, 06:21:28 PM »
Thanks all, i think the right approach for me is to hold dividend paying funds in the tax advantaged accounts and the funds focused on low/no dividend paying companies in taxable accounts. That way I can maintain exposure to dividend paying companies in my overall allocation but still control when I recognize income.

I'm already doing something like this, but over time those allocations get out of whack.

Thanks!