Last Updated on November 29, 2024 by Chin Yi Xuan
SCHD is one of the favourite ETFs among dividend investors thanks to its decade-long track record of dividend growth and solid historical return.
However, for non-US residents from countries like Malaysia and Singapore, investing in SCHD (which is listed in the US) comes with a 30% dividend withholding tax (WHT). This is not ideal considering most SCHD investors are investing for dividends.
Let’s say you are receiving $100 in dividends, you’ll only end up getting $70 due to withholding tax.
Investing in Ireland-domiciled ETFs as an alternative
One alternative is to invest in Ireland-domiciled dividend ETFs which are listed on the London Stock Exchange (LSE), as it comes with 15% dividend withholding tax (WHT) instead of 30%.
In this post, I will go through the 3 best Ireland-domiciled dividend growth ETFs, and discuss if they are good alternatives to SCHD.
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Table of Contents
Overview: What and why invest in Ireland-domiciled ETFs?
Ireland-domiciled ETFs are ETFs registered & regulated in Ireland. However, they are typically listed & traded on the London Stock Exchange (LSE).
Here are 2 key reasons why dividend investors should consider Ireland-domiciled ETFs over US-domiciled ETFs:
Reason #1: 15% dividend withholding tax on Ireland-domiciled ETFs
Thanks to Ireland’s double taxation treaty with the US, ETFs domiciled in Ireland only pay 15% withholding tax on US dividends, instead of the 30% dividend withholding tax that US-domiciled ETFs are charging for non-US residents.
Reason #2: Availability of Ireland-domiciled ETFs that track the US market
Another plus point is that despite being listed in London, there are Ireland-domiciled ETFs that track the US market, making it possible for us to find alternatives to SCHD.
Comparison: Ireland-domiciled ETFs vs US-domiciled ETFs
| Ireland-domiciled ETFs | US-domiciled ETFs | |
| Dividend withholding tax (WHT) for non-US residents (Malaysia/Singapore) | 15% | 30% |
| ETFs that track the US market | Yes (though lesser in choice) | Yes |
| Expense ratio | Generally low, but slightly higher than US-domiciled ETFs | Generally low |
| Currency | Mostly available in GBP & EUR, with variants in USD | USD |
| Commission (Interactive Brokers Pro: Tiered Commission) | 0.05% of trade value (initial tier), min. USD 1.70/order | USD 0.0035 (initial tier), min. USD 0.35/order |
READ MORE: Interactive Brokers (IBKR) long-term review & pricing
My 2 selection criteria for Ireland-domiciled dividend growth ETF
To recap, SCHD is loved by many dividend investors thanks to its record of dividend growth and decent overall returns.
As such, while looking for Ireland-domiciled alternatives for SCHD, I have 2 key criteria:
#1 Consistent record of dividend growth
Firstly, the goal is to look for Ireland-domiciled ETFs with a record of dividend growth.
This is in line with SCHD which has a 12-year streak in growing its dividends.
#2 Decent overall performance (total return)
Next, it is also important to identify Ireland-domiciled ETFs that delivered a decent overall performance.
In other words, I’d be looking for those that delivered positive historical Total Return (price AND dividend growth).
READ: Introduction to dividend growth investing
#1 Fidelity US Quality Income UCITS ETF USD (FUSD)
i. FUSD Overview: A solid overall performer
Listed in 2017, FUSD is an Ireland-domiciled ETF focusing on high-quality large & mid-capitalization dividend-paying US companies.
| Ticker/Symbol | FUSD |
| Traded Currency | USD |
| Dividend Yield (As of 07/2024) | 1.94% |
| Expense Ratio | 0.25% p.a. |
| Asset Under Management (AUM) (as of 06/2024) | USD 1,571 m |
| Dividend Payout Frequency | Quarterly |
ii. Methodology: How are stocks selected to be part of FUSD?
The FUSD tracks the underlying performance of the Fidelity US Quality Income Index. Stocks are screened based on the following:
| (A) Non-banking stocks | (B) Banking stocks |
| i. Cash Flow margin: Measure how efficient a company is at converting sales to cash. | i. Return of Equity: Measure profitability of a company |
| ii. Return on invested capital (ROIC): Measure how well a company is making profit relative to the assets/equity committed. | ii. Debt-to-assets: Measure the financial leverage of a company. |
| iii. Free Cash Flow Stability: Measures the financial strength of a company |
Finally, companies with the highest dividend yield are selected.
FUSD is also ESG-sensitive, where certain businesses are excluded from selection, such as military & weaponry, tobacco, adult entertainment, and alcohol.
I like the selection criteria of the Fidelity US Quality Income Index which ensure that only companies with a strong financial foundation (eg. healthy cashflow) are selected.
iii. Top 10 holdings & sector of FUSD
As of June 2024, FUSD is an ETF with exposure weighted towards the tech sector (34.9%), followed by the financial (12.1%) and healthcare sector (11.9%).
The top 10 holdings in FUSD include familiar names like Microsoft, Apple, and Nvidia, which make up about 33% of FUSD’s holdings.
iv. A look at FUSD Dividends
As of July 2024, FUSD pays about 1.96% in dividend yield.
That said, the more important metric is distribution growth (p.s. find out WHY here). Did FUSD manage to grow its dividends over time?
From FUSD’s distribution (or payout) history below, FUSD managed to grow its distribution from 2018 – 2021. However, it experienced a dividend cut in 2022 due to a challenging market environment and managed to raise its dividend again in 2023.
Given a tricky 2022, I think this is an acceptable distribution growth trend, and I expect FUSD to continue raising its dividends in 2024 as the market has been doing well so far.
v. Overall performance of FUSD
As of July 2024, FUSD has delivered a year-to-date total return (price & dividend growth) of 12.72%.
This is expected, considering FUSD has heavier exposure to the tech sector, namely companies like Apple, Microsoft, and Nvidia.
FUSD also has a solid 5-year annualized return of 12.91%.
| Performance as of July 2024 | FUSD |
| Year-to-date total return (%) | 12.72% |
| 5-year annualized return (%) | 12.91% |
vi. Verdict for FUSD: Solid overall performance, though it lacks a convincing dividend growth record
FUSD is an Ireland-domiciled ETF that I personally own in my Freedom Fund. I like FUSD for its solid overall performance and relatively low expense ratio (0.25% p.a.) compared to other Ireland-domiciled dividend ETFs.
However, what FUSD lacks is a solid dividend growth record since 2022. As I am looking into these ETFs for dividend growth, this is what stopping me from investing more in FUSD for the time being.
#2 Fidelity Global Quality Income UCITS ETF (FGQI)
i. FGQI Overview: The global brother of FUSD
Listed in 2017, FGQI is almost similar to the FUSD ETF that we discussed above. The difference is that FGQI covers dividend stocks from developed markets, including stocks listed in the US, Japan, UK, and France.
| Ticker/Symbol | FGQI |
| Traded Currency | USD |
| Dividend Yield (As of 07/2024) | 2.40% |
| Expense Ratio | 0.40% p.a. |
| Asset Under Management (AUM) (as of 06/2024) | USD 756m |
| Dividend Payout Frequency | Quarterly |
ii. Methodology: How are stocks selected to be part of FGQI?
The FGQI tracks the underlying performance of the Fidelity Global Quality Income Index.
With the exception of multiple-country stock exposure, FGQI stock selection criteria are almost similar to FUSD:
| (A) Non-banking stocks | (B) Banking stocks |
| i. Cash Flow margin: Measure how efficient a company is at converting sales to cash. | i. Return of Equity: Measure profitability of a company |
| ii. Return on invested capital (ROIC): Measure how well a company is making profit relative to the assets/equity committed. | ii. Debt-to-assets: Measure the financial leverage of a company. |
| iii. Free Cash Flow Stability: Measures the financial strength of a company |
Finally, companies with the highest dividend yield are selected.
Just like FUSD, FGQI is also ESG-sensitive, where certain businesses are excluded from selection, such as military & weaponry, tobacco, adult entertainment, and alcohol.
The selection criteria of FGQI ensures that the stocks selected are financially robust.
iii. Top 10 holdings, geographical and sector exposure of FGQI
As of June 2024, close to 71% of FGQI holdings are listed in the US, followed by Japan (6.1%), France (3.7%), and the UK (3.0%).
In other words, most FGQI holdings are still US-focused, such as Microsoft, Apple, and Nvidia. That said, there is also exposure to quality dividend stocks from other developed markets, such as ASML Holding and Novo Nordisk from Europe.
FGQI is an ETF that is weighted heavier towards the tech sector (27.7%), followed by financials (15.2%), and healthcare (11.8%).
iv. A look at FGQI Dividends
As of July 2024, FGQI pays about 2.40% in dividend yield. This is higher than FUSD’s 1.94%.
How about its distribution growth for the past few years?
Similar to FUSD, FQGI experienced a dip in distribution in 2022, but managed to recover in 2023 with the highest distribution yet.
In terms of recovery of dividend growth from a challenging 2022, I think FQGI is slightly better than FUSD.
v. Overall performance of FQGI
As of July 2024, FQGI has delivered a year-to-date total return (price & dividend growth) of 10.40%
Meanwhile, FQGI also delivered a decent 5-year annualized return of 11.15%.
| Performance as of July 2024 | FQGI |
| Year-to-date total return (%) | 10.40% |
| 5-year annualized return (%) | 11.15% |
vi. Verdict for FQGI: Decent globally diversified dividend growth ETF
As the global version of FUSD, FQGI is a great option for dividend growth investors looking for exposure outside of the US.
The decent dividend growth and past return are 2 plus points of FQGI.
However, its 0.40% p.a. expense ratio is slightly on the high side, especially in comparison to SCHD (0.06% p.a.) and FUSD (0.25% p.a.).
#3 SPDR S&P US Dividend Aristocrats UCITS ETF (UDVD)
i. UDVD Overview: Consistent Ireland-domiciled dividend growth ETF
Listed in 2011, UDVD is focused on US stocks with at least a 20-year record of increasing dividends.
| Ticker/Symbol | UDVD |
| Traded Currency | USD |
| Dividend Yield (As of 07/2024) | 2.22% |
| Expense Ratio | 0.35% p.a. |
| Asset Under Management (AUM) (as of 06/2024) | USD 3,445 m |
| Dividend Payout Frequency | Quarterly |
ii. Methodology: How are stocks selected to be part of UDVD?
The UDVD tracks the underlying performance of the S&P High Yield Dividend Aristocrats Index. It is comprised of US stocks that have raised their dividends every year for at least 20 consecutive years.
Stocks are screened based on the following:
| Universe | Stocks must be part of the S&P500 Composite 1500. It includes large, medium, and small market-cap US stocks, making up to 90% of the US stock market. |
| Dividends | Stocks that have raised dividends EVERY year for at least 20 years. |
| Market Cap | Market capitalization of at least USD 2 billion. |
| Liquidity | Stocks with average daily value traded of at least USD 5 million |
| Diversification | Each stock is capped at 4% of total holding. |
While it may seem attractive to only include stocks with at least 20 years of dividend growth streak, it also means the exclusion of many notable names that may not have such a long track record, such as Apple (11-year dividend growth streak).
In other words, it may lead to UDVD holding to give way to many less-known companies, as we’ll see below.
iii. Top 10 holdings & sector of UDVD
UDVD is a rather balanced ETF. As of June 2024, the top 3 sectors of UDVD are consumer staples (18.07%), industrials (17.99%), and the utility sector (17.42%) respectively.
Unlike FUSD and FQGI, there is no single sector that dominates the sector breakdown for UDVD:
The top 10 holdings in UDVD are generally less familiar names like Realty Income Corp, Chevron Corporation, and Kimberly-Clark Corporation.
These are companies with at least 20 years of record in raising their dividends.
iv. A look at UDVD Dividends: Consistent decade-long dividend growth
As of July 2024, UDVD pays about 2.22% in dividend yield.
UDVD displayed a consistent dividend growth record since 2014, with a small blip in 2022, which recovered in 2023.
Among all 3 Ireland-domiciled ETFs in this post, UDVD has a more reliable dividend growth record than FUSD and FQGI.
v. Overall performance of UDVD
As of July 2024, UDVD has delivered a year-to-date total return (price & dividend growth) of 4.19%.
This is pale compared to FUSD and FQGI, which makes sense due to UDVD’s lack of exposure to stocks in the tech sector (such as Nvidia and Apple) which are driving most of the growth in 2024.
UDVD has a so-so 5-year annualized return of 6.64%.
| Performance as of July 2024 | UDVD |
| Year-to-date total return (%) | 4.19% |
| 5-year annualized return (%) | 6.64% |
vi. Verdict for UDVD: Consistent dividend growth, subpar overall growth
I used to own UDVD as part of my Freedom Fund, but I’ve decided to dispose of it in Q2 2024.
Reason being, I find the >20-year dividend growth selection rule, while seems attractive, has to be done by sacrificing many excellent dividend growth stocks like Apple.
As a result, many of UDVD holdings are very mature stocks (I mean, what kind of company raises its dividend for >20 years?) with less growth opportunity, leading to a subpar total return.
Comparison: Ireland-domiciled dividend ETFs (FUSD, FQGI, UDVD) vs SCHD
Before I share my concluding thoughts in the final verdict, let me lay out some side-by-side facts & features of all 4 dividend growth ETFs that we’ve discussed in this post today:
| SCHD | FUSD | FGQI | UDVD | |
| Domicile | US | Ireland | Ireland | Ireland |
| Exposure | US market | US market | Developed market (US, Japan, UK etc) | US market |
| Special traits (as of 06/2024) | 12-year dividend growth streak | Tech-heavy holdings | Tech-heavy holdings, global exposure | Only stocks with >20 years of div. growth are included. |
| Expense Ratio | 0.06% p.a. | 0.25% p.a. | 0.40% p.a. | 0.35% p.a. |
| Dividend Yield (as of 07/2024) | 3.64% | 1.96% | 2.40% | 2.22% |
| Dividend Growth Streak | 12 years | 1 year | 1 year | 1 year |
| YTD Total Return (as of 07/2024) | 4.17% | 12.72% | 10.40% | 4.19% |
| 5-Year Annualized Return (as of 07/2024) | 11.78% | 12.91% | 11.15% | 6.64% |
READ: My SCHD ETF review
How to invest in Ireland-domiciled ETFs
Investing in Ireland-domiciled ETFs like FUSD, FGQI, and UDVD requires access to the London Stock Exchange (LSE).
Since most brokers in Malaysia do not offer access to the London market, my go-to broker to invest in Ireland-domiciled ETFs is Interactive Brokers (IBKR).
Interactive Brokers (IBKR) is one of the most reliable global brokers as it is regulated by financial authorities in over 10 countries (eg. US, UK, SG, HK, Australia, and more).
Aside from that, IBKR offers access to the USD-denominated Ireland-domiciled ETF at an affordable fee. You can check out IBKR’s fee structure HERE (under ‘United Kingdom’ > ‘USD-denominated’)
READ: My Interactive Brokers (IBKR) long-term user review
Verdict: There’ll be trade-offs while selecting Ireland-domiciled ETF as an alternative to SCHD
In my mission to look for the best SCHD alternatives in Ireland-domiciled ETFs, I find it difficult to find the perfect duplicate of SCHD.
For instance, SCHD has a solid 12-year dividend growth streak record, while the Ireland-domiciled ETFs we explored in this post (FUSD, FGQI, and UDVD) experienced a dividend cut in 2022.
However, FUSD and FGQI have shown a better total return relative to SCHD in 2024 thanks to their tech-heavy exposure to companies like Apple and Nvidia.
Simply put, in Ireland-domiciled ETFs, I have yet to find a perfect SCHD replacement, nor do they have an absolute advantage over SCHD.
What do you think?
Stay tuned as I continue my quest to search for the best SCHD alternatives (in other markets, maybe!).
Meanwhile, check out my go-to broker to invest in Ireland-domiciled ETFs below!
Disclaimers
Any of the information above is produced with my own best effort and research.
This post is produced for general information purposes only. It is not intended to constitute professional advice, and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances.
The inclusion of Interactive Brokers’ (IBKR) name, logo or weblinks is present pursuant to an advertising arrangement only. IBKR is not a contributor, reviewer, provider or sponsor of content published on this site, and is not responsible for the accuracy of any products or services discussed.
Hi Yi Xuan,
Creat article regarding non-US domiciled ETFs. Another thing, it is more convenient to have a trading time based on the UK instead of NY time. But having said that, do you know how the price is affected when trading an Irish-domiciled ETF that has US companies when the NY market is closed? I am wondering if there is a wider price spread or more volatility during those times.