2019 QDI figures for international

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Startled Cat
Posts: 505
Joined: Thu Apr 03, 2008 8:54 pm

2019 QDI figures for international

Post by Startled Cat » Sun Feb 09, 2020 2:29 pm

I took a look at the 2019 qualified dividend percentages for some international funds and they're not very pretty.

2019 QDI%:

Code: Select all

VEA Vanguard FTSE Developed Markets ETF              76.35%
VXUS Vanguard Total International Stock ETF          64.86%
VWO Vanguard FTSE Emerging Markets ETF               38.41%

IEFA iShares Core MSCI EAFE ETF                      83.93%
IXUS iShares Core MSCI Total International Stock ETF 73.22%
IEMG iShares Core MSCI Emerging Markets ETF          49.11%
sources:
https://advisors.vanguard.com/VGApp/iip ... endfigures
https://www.ishares.com/us/literature/t ... 059993.pdf

2018 comparison:

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VEA Vanguard FTSE Developed Markets ETF              81.21%
VXUS Vanguard Total International Stock ETF          74.58%
VWO Vanguard FTSE Emerging Markets ETF               49.31%

IEFA iShares Core MSCI EAFE ETF                      91.91%
IXUS iShares Core MSCI Total International Stock ETF 85.19%
IEMG iShares Core MSCI Emerging Markets ETF          59.84%
sources:
https://personal.vanguard.com/us/insigh ... ncome-2018
https://www.ishares.com/us/literature/t ... 711553.pdf

As before, the iShares funds had about 10% more of their dividends classified as qualified dividend income across the board than the Vanguard equivalents, but every fund across both fund families had a significant decline in the qualified dividend percentage (ouch!). I'm curious if anyone knows why international was less tax-efficient in 2019 than 2018.

As an aside, out of idle curiosity I recently did some number crunching on whether international stock could work better in a low-cost variable annuity than a taxable account. For example, Fidelity has a variable annuity with all-in expenses as low as 0.22% for international exposure (on a $1M balance). My conclusion so far is that it's hard to find a realistic scenario where the variable annuity is a clear financial win, even before considering the practical disadvantages like illiquidity and limited fund choices. Trading off qualified dividends and long-term capital gains for tax deferral doesn't usually seem to be worth it. However, if international fund tax-efficiency continues to decline going forward, that would provide a boost for the variable annuity in this analysis.

Northern Flicker
Posts: 5866
Joined: Fri Apr 10, 2015 12:29 am

Re: 2019 QDI figures for international

Post by Northern Flicker » Sun Feb 09, 2020 4:52 pm

I don’t think there is a single factor causing this. The growth in global REITs and increase in number of global small-caps are factors, but even the index funds that exclude small-caps like EEM and EFA saw declines in QDI%.

Another factor is that there was outperformance for Taiwan and Brazil leading to their contributing a larger share of dividends, and Saudi Arabia, Qatar, and UAE being added to int’l EM and total indices. Those five are countries for which zero dividend income is qualified for beneficial US tax treatment. (Others would be Malaysia, Singapore, and Chile, and Hong Kong is virtually zero).

No doubt there were other factors.
Risk is not a guarantor of return.

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