The Lord Abbett International Core Equity Fund, which launched this past June, starts with a qualitative dividend yield screen. "We look at all the companies outside the U.S. with a market cap greater than $1.5 billion," says McBride. "Within that universe, we look at the top decile companies. The lower end of the yield curve is about 5.5%. The average yield of stocks in the fund, after taxes and expenses, is about 7% currently."
Foreign Taxes
Foreign taxes can be a factor in the overall return, and such stocks or funds should be housed in one's regular taxable account. The reason: Foreign governments routinely withhold 10% to 15% in taxes from foreign dividend payments. So, for example, if you own the foreign stock or fund in an IRA or 401(k) account, you don't get any credit for those taxes withheld. If owned in a regular account, however, the first $1,500 per year of withholdings becomes a tax credit, explains John M. Smartt Jr., a CPA and RIA in Knoxville, Tenn.
Bruce W. Fraser is a freelance writer in New York City. He may be reached at [email protected] (www.bwfraser.com/home).