You will calculate what a US-listed holding actually pays you each year after withholding and conversion costs.
Hakim is choosing between two US-listed holdings for the income part of his portfolio. A comparison site shows one yielding 1.4% and the other 3.0%. Those are the numbers everyone quotes. Neither is what he would actually receive, because both are quoted before US withholding and before he converts anything back to Singapore dollars.
This exercise turns a quoted yield into the yield that reaches you. It takes four steps and a small table. The worked example uses made-up figures for two holdings, a fund and a single US company, each worth S$20,000.
Start with the trailing dividend yield: the dividends paid over the last twelve months divided by the current price. Take it from the fund's own factsheet or website, or for a company, from its own dividend announcements and the current share price. Comparison sites are fine for spotting holdings, but their figures can lag, use a different period, or count a one-off special dividend.
If you work it out yourself, add up the dividends per share paid over the last twelve months and divide by today's price. A yield is backward-looking. It tells you what was paid, not what will be paid.
In the worked example, the fund has a trailing yield of 1.4%, and the company 3.0%. On S$20,000 each, that is S$280 a year from the fund and S$600 from the company, before tax.
As lesson 3.1, Why 30% of a US dividend never reaches you, explained, a Singapore resident usually has 30% withheld from US dividends. So multiply the gross yield by 0.7.
The fund's net yield becomes 1.4% times 0.7, which is 0.98%. The company's becomes 3.0% times 0.7, which is 2.1%. In dollars, the fund now pays S$196 a year and the company S$420.
The gap between the two holdings has shrunk in dollar terms, from S$320 to S$224. The higher the yield, the more the withholding takes in absolute terms.
If your broker converts dividends to Singapore dollars, or you convert them later to spend, the spread from lesson 2.1 applies to each payment. If you hold a US dollar balance and reinvest dividends in US dollars, as lesson 2.2 described, skip this step for now and note that you will pay it when you eventually convert.
In the worked example, the conversion costs 0.5% of each dividend. Multiply the net yield by 0.995. The fund's yield after FX is 0.98% times 0.995, about 0.975%. The company's is 2.1% times 0.995, about 2.089%. In dollars, the fund pays about S$195.02 and the company about S$417.90.
This step makes less difference than the withholding, but it is real, and it repeats every time a dividend is paid. If your spread is closer to 1%, or your broker charges a minimum fee per conversion, small dividends can lose a bigger share.
Your table has one row per holding and these columns: holding, source of the yield and the date you checked, gross yield, net yield after withholding, net yield after FX, and the yearly amount in Singapore dollars at your holding size. Hakim's two rows read: fund, 1.4% gross, 0.98% after withholding, about 0.975% after FX, about S$195 a year; company, 3.0% gross, 2.1% after withholding, about 2.089% after FX, about S$418 a year.
Then compare the last column with the gross figure the comparison site quoted. For Hakim, both holdings deliver a little under 70% of the headline. The quoted 3.0% is really about 2.09% in his hands.
The after-tax yield is one input. It does not tell you which holding is better, because a dividend is only part of the return. A holding with a lower yield may grow more in price, and price gains are not withheld for a non-resident, as lesson 3.1 noted. Comparing total returns, and deciding how much income you want from a portfolio, belongs to other courses. Dividend stocks and S-REITs covers how to judge dividends themselves.
What the table does is stop you comparing a US holding at its gross yield against a Singapore holding whose dividends arrive without withholding. That comparison flatters the US holding every time.
Now build your own table for two holdings you own or are considering. Use each issuer's own figures, your own measured FX spread, and your own holding sizes, and write the date beside each yield.
Calculate gross yield, net yield after withholding and net yield after FX for two holdings you own or are considering, in one table.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).