Low-dividend paying ETFs - are there any?

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Low-dividend paying ETFs - are there any?

Postby markierussell » Mon Mar 14, 2011 8:31 pm

Hi All,

For tax reasons I'm looking for a good index (or passive) ETF that minimizes dividend payout. I know there are many tax-managed funds, some of which do that. But few if any seem to have ETF versions. The only tax-managed Vanguard ETF I can find is VEA, a share class of Vanguard Tax-Managed International Fund. But it invests in foreign equities and does not say that it minimizes dividends (it mentions capital gains only). Any suggestions?

Thanks!

M
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Postby fredflinstone » Mon Mar 14, 2011 8:56 pm

VOT
VBK
QQQQ

all have a very low dividend yield.
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Low-dividend paying ETFs - are there any?

Postby markierussell » Mon Mar 14, 2011 10:09 pm

Fred, thanks! Did you get those by looking at their SEC yields? Guess it stands to reason that ETFs that track smaller companies would receive less dividends.

Does anyone know of an ETF with low dividend yield that tracks the whole U.S. market or large caps? I suppose it would have to be specially managed for that since by their nature those stocks would normally pay a fair amount of dividends.

Thanks,

M
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Re: Low-dividend paying ETFs - are there any?

Postby Wagnerjb » Mon Mar 14, 2011 10:11 pm

markierussell wrote:Hi All,

For tax reasons I'm looking for a good index (or passive) ETF that minimizes dividend payout. I know there are many tax-managed funds, some of which do that. But few if any seem to have ETF versions. The only tax-managed Vanguard ETF I can find is VEA, a share class of Vanguard Tax-Managed International Fund. But it invests in foreign equities and does not say that it minimizes dividends (it mentions capital gains only). Any suggestions?

Thanks!

M


The only fund that I am aware of that minimizes dividends is the Vanguard Tax Managed Capital Appreciation fund. But that is a mutual fund, and I am not aware of any ETFs that actively manage the dividend yield. They tend to be linked to an index, thus no active tax management. Of course, some indices may have a naturally lower dividend yield, but that isn't from active management for tax efficiency.

Best wishes.
Andy
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Re: Low-dividend paying ETFs - are there any?

Postby altruistguy » Fri May 10, 2013 10:47 am

Yes -- it sure would be nice if there existed some low-dividend ETFs. But to my knowledge, there still are none. While there certainly may be some out there with lower yields, that doesn't mean that they are specifically managed to minimize dividends.

In addition to the Vanguard Tax-Managed Capital Appreciation fund, I believe that the Vanguard Tax-Managed Balanced Fund uses the exact same dividend-lessening strategy for its stock component.

DFA's tax-managed funds used to do this too. But when the Bush tax-cuts hit about ten years ago, lessening the problem with dividends (qualified dividends, anyway), they dramatically lessened (to the point of apparent elimination) their attempts to lessen yield of those funds. It remains to be seen whether the recent increase in marginal tax rate for qualified dividends for high-income investors will spur them to start reducing yield in their tax-managed funds again.

I wouldn't hold my breath for further good investing options along these lines. There's much more of a market out there for high-yield investing vehicles than for low-yield. My advice at this point -- use the two Vanguard Products where appropriate and don't worry about this dividend issue too much beyond that. Since there exist no good answers at this point, it doesn't seem prudent to continue worrying about it too much.

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Re: Low-dividend paying ETFs - are there any?

Postby grabiner » Fri May 10, 2013 10:19 pm

markierussell wrote:For tax reasons I'm looking for a good index (or passive) ETF that minimizes dividend payout. I know there are many tax-managed funds, some of which do that. But few if any seem to have ETF versions. The only tax-managed Vanguard ETF I can find is VEA, a share class of Vanguard Tax-Managed International Fund. But it invests in foreign equities and does not say that it minimizes dividends (it mentions capital gains only). Any suggestions?


Are you a non-resident alien so that you pay 30% tax on all dividends? If not, then you have a tax reason for minimizing dividends, but also for maximizing the fraction which are qualified. VEA doesn't do much to minimize dividends, but it does have 100% qualified dividends, unlike most foreign funds, so it will lead to lower tax bills.

But all the low-dividend ETFs either have high expenses (which reduce the dividend in a way which doesn't benefit you) or track low-dividend sectors of the market. If you don't need to use ETFs, you could use Vanguard Tax-Managed Capital Appreciation, but even there, I would guess that 500 Index will save you as much in expenses as it costs in taxes, and Total Stock Market Index is as good as 80% Tax-Managed Capital Appreciation and 20% Tax-Managed Small-Cap.

It is possible to have low-dividend ETFs in your taxable account and high-dividend ETFs or funds in your 401(k); you could have growth ETFs in taxable and value ETFs in tax-deferred.
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Re: Low-dividend paying ETFs - are there any?

Postby CABob » Fri May 10, 2013 10:56 pm

I haven't looked to compare specifically, but what about VGEQX Vanguard Growth Equity fund?
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