Investing September 19, 2026 0 Comments

Why Ignoring the 30% Dividend Withholding Tax Might Be the Smartest Move You Make This Year

Remember when that 30% dividend withholding tax on US stocks used to feel like getting punched in the gut? Yeah, I’ve been there — staring at my portfolio, seeing that handsome 4% yield suddenly sliced down to a paltry 2.8% thanks to Uncle Sam’s cut. It’s the kind of math that makes any dividend investor squirm, especially when a local Singapore stock flaunts the same 4% yield, tax-free. Naturally, you’d pick the local one, right? But here’s the kicker — what if those pesky dividends actually grow? What if that reduced US payout today morphs into an 8.7% yield on cost a decade down the road thanks to juicy dividend raises? Suddenly, that 30% withholding tax looks a lot less scary, and the story behind those numbers gets a whole lot richer. So, how do you spot the real winners amidst a sea of ‘convenient’ choices? Well, it starts by looking past the immediate tax bite and learning to sniff out companies with decades of dividend growth history — the kind that defy simple yield comparisons. Intrigued? Let’s dive deeper into why the headline withholding tax isn’t the whole story — and why dismissing US dividend stocks outright might just be the biggest missed opportunity in your portfolio. LEARN MORE.

Think back when I was a dividend investor, that 30% dividend withholding tax on US stocks was a big thing for me.

I kind of get it whenever I bring up some data on US stocks and the word “dividend” in the data and this 30% withholding tax thingy is thrown straight at my face.

I understood where that is coming from.

If you have a US stock that has a prevailing dividend yield of 4% and one Singapore stock that has a similar 4% prevailing yield, the 30% dividend withholding tax would cut the payout that you get to 2.8%. Not a great look.

You would of course pick the Singapore dividend stock if all your returns, for the next x years is 4% and all the returns of the US stock is 2.8%.

That may not be the total returns after x years.

You see, dividends grow, or could stagnate or could even shrink. My post on the range of dividend growth recently should give you some idea about how variable dividend growth can be.

The 4% Singapore yielder could stagnate, but that to a lot of people is okay. The 2.8% US yielder may grow its dividend at 12% a year for the next 10 years. How does 8.7% yield on cost after 30% withholding tax sound to you while some dividend stocks stagnate or even shrink?

Its not a given a stock can growth its dividend yield by 3 times Kyith (12% compound over 10 years). That is true, but there are stocks with low payout that are able to reinvest their retained earnings at a high return on equity compare to companies that are matured and 4% is 80% of their earnings.

I do understand the opposite is true as well. The 2.8% yielder could shrink and the 4% could go the other way.

The point that I am trying to make is… you realize after a while that 30% dividend withholding tax is not the main consideration. There are other more critical considerations.

I think investors need to try their best not jump into “how does that look for the Singaporean investor” lens because you might not realize that there is a group of US or international stocks that unlike Singapore stocks, had a history of 25 or 40 years of consecutive dividend raises.

How do they do that? What are the common characteristics?

If you just dismiss them immediately, you might not realize that you may be investing in potential dividend traps. could not identify which stocks may look like long term dividend compounders.

You read about a lot of stories that are ladies, older gentlemen or ladies, and you sure enjoy the tale or learn something from their story.

But you don’t go: I can’t become a woman, so why do I want to read this story?

I felt that cost sometimes depends on whether you know its there or are so abstract away from them. Keppel REIT’s last 2 years’ full year distributable income $214 million and $212 million respectively. This distributable income was after manager’s management fees of $58 million and $56.4 million respectively.

That is almost 27% of distributable income as fees either paid out or diluted.

But if you are a Keppel REIT shareholder, this cost feels okay for you to pay.

Yet folks would not pay a one time ABSD for their property, if the reason they buy the property is that 30-40 years later it will confirm appreciate in value.

I just find that sometimes folks need to sometimes be more philosophical about these fees and taxes. We should try to minimize costs. But remember the other side of the equation is that you can pay a fee/tax/cost but if the investment profits can grow at a high clip its a different story altogether.

A note on withholding taxes: Withholding taxes is based on where the company is incorporated. A company can be listed in the US stock exchange but they do not pay US withholding tax. Garmin is swiss incorporated but listed in the US and follows the Switzerland withholding tax. Sony is incorporated in Japan and listed in US and follows the Japan withholding tax.

Withholding taxes can be reduce if the investor or fund manager are incorporated in a country with dual taxation treaty with the countries. For example, a Irish domicile fund has benefit because Ireland has dual taxation treaty with US, Switzerland and Japan.

So instead of 30%, 35% and 15% withholding tax, the dual taxation treaty will keep the withholding tax of an Irish fund to 15%, 15% and 15%.

So its not always 30%.

If I just stop at accepting 30% withholding tax, I would never progress to learn about these little things.

Kyith is the Owner and Sole Writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, firmer wealth foundations, how to have a Passive investment strategy, know more about investing in REITs and the nuts and bolts of Active Investing.

Readers also follow Kyith to learn how to plan well for Financial Security and Financial Independence.

Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Fee-only Wealth Advisory Firm Providend. All opinions on Investment Moats are his own and does not represent the views of Providend.

You can view Kyith’s current portfolio here, which uses his Free Google Stock Portfolio Tracker.

His investment broker of choice is Interactive Brokers, which allows him to invest in securities from different exchanges all over the world, at very low commission rates, without custodian fees, near spot currency rates.

You can read more about Kyith here.