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Fixed Income / Bond ETFs - How do you select them?

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  1. #11

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    This might be a bit too far out of left field for this thread but have you looked at UK£ preference shares and ex-PIBS? If you don't mind the currency risk.

    E.g. Standard Chartered Bank 7.375% pref and 8.25 pref. (STAB and STAC)
    Available at a yield of roughly 6.5%. These are perpetual, fixed dividend shares that act like non-dated fixed income.
    There are a few similar issues from the likes of Santander Bank, Lloyds, NatWest, Aviva.

    The yields are juicy but there are of course risks! DYOR as always....


  2. #12

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    It is correct that non payment of the dividends (not 'coupon', they are not bonds - may make a difference depending on your tax situation) does not trigger a default event, and the dividends are non-cumulative, but in it's favour:

    If dividend payment is not made on these prefs then there can be no dividend on the overwhelming number of ordinary shares.
    Even in 2015 - 2017 when there was no dividends on ordinary SC shares these still paid in full.
    If dividends are indeed missed then instead you receive extra pref shares to the nominal value times 5/4.

    These conditions are not the same for all pref shares, each issue should be researched separately and carefully. DYOR.

    john_1122 likes this.

  3. #13

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    I took the lazy approach and simply selected GOVT and IGOV, both position sizes have equal value.


  4. #14

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    @Windmill65 - why would you put money into IGOV?

    Curious about this attached chart and also - if you're looking at ex-US GOVT then why route through the US and pay WHT?

    Name:  Screenshot 2019-03-08 at 3.34.09 PM.png
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  5. #15

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    OK. Will have a look at the WHT issue and confirm.


  6. #16

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    Quote Originally Posted by shri:
    @Windmill65 - why would you put money into IGOV?

    Curious about this attached chart and also - if you're looking at ex-US GOVT then why route through the US and pay WHT?

    The key word was "lazy". I am holding a basket of ETFs in the US (using IB). A relatively small portion of this basket is in bonds and I wanted to split this up evenly between US bonds and non-US bonds. I didn't want to subdivide the non-US portion in bond ETFs from specific regions or countries. That is why I ended up using IGOV.
    IGOV does pay dividend (it did so in December 2018) and IB did withhold 30% tax on this dividend. In my situation this dividend tax is something I cannot avoid.

  7. #17

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    That Dec div is the only one they have paid all year in 2018 & 2017.


  8. #18

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    Original Post Deleted
    I started this basket of ETFs in May 2018, including a position in IGOV. Since the initial position have I been adding to it as I poured more money in this basket.

    According to this chart at Yahoo did they also pay dividend in December 2017. Until 2017 they seem to have paid quarterly dividends. I didn't have a position back then so I can't confirm this.
    https://finance.yahoo.com/quote/IGOV/chart?p=IGOV

  9. #19
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    One could be forgiven for thinking that the US is actively trying to discourage investment from overseas persons.

  10. #20

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    Original Post Deleted
    Thank you for sharing your knowledge and experience. I appreciate this! If I do learn something I will report back.

    I receive a monthly statement from IB, but I think that I am not financially versed enough to be able to read it properly. Especially the sections related to dividend paid and dividend taxes withheld are rather confusing to me. I sometimes see a negative tax withheld on an ETF position one month, to see the exact same value, but then as positive amount, the following month. I guess I would have to combine several of those monthly statements together to see what the nett result is, how much tax is actually being withheld. Anyway, although receiving dividend is nice, it is not the main target of these investments. Just another cherry on the cake.