How to own international shares without sacrificing dividends

The Australian share market is one of the best places to invest if you’re looking to create any meaningful sort of income.

Dividend yields are high compared to overseas, plus those dividends come with franking credits attached, making the after-tax income even more attractive.

But believe it or not, it’s actually possible to invest internationally and still receive a good level of income, even fully-franked no less. It’s possible by investing in Aussie listed investment companies (LICs) which invest globally, yet pay tax in Australia.

Platinum Capital Limited (ASX: PMC)

This LIC is managed by Platinum Asset Management Limited (ASX: PTM) and has been running since 1994 with solid performance over its 24-year history.

Performance after all costs and fees has been 12.4% per annum, versus the MSCI World Index return of 7.1%, since 1994, both including dividends.

Platinum Capital invests globally, with Asia Pacific making up just over 50% of the portfolio currently. This is by design as Platinum is bullish on the Asian region and currently sees many equities undervalued, based on fears of trade wars among other things.

The portfolio includes stakes in businesses located in China, Japan and Korea. It also has other investments listed in Germany, Switzerland and elsewhere.

The company targets undervalued shares with earnings growth potential and will also look to recycle profit into additional securities trading at attractive prices relative to the outlook for these companies.

For income investors, Platinum pays tax on these profits in Australia and generates a decent amount of franking credits. Because of this, the company is able to pay out a decent level of fully-franked dividends each year.

It’s one of the better run LICs out there, with a long performance history (after fees), a knowledgeable investment team and a decent dividend. Shares currently trade at a premium to NTA of 13%, and a dividend yield of 7.6% including franking credits.

Other contenders?

The other obvious choice to emerge for Aussies wanting to invest internationally, without giving up income, is WAM Global Ltd (ASX: WGB). Through its various LICs, Wilson Asset Management (WAM) always place a strong emphasis on providing shareholders with a strong level of dividends. I expect WAM Global to be run the same way.

However, I’d choose Platinum Capital over WAM Global today, because Platinum has proven themselves over 20 years, whereas WAM hasn’t yet built a track record of managing international equities. I’ll be watching with interest to see how each company fares over the next few years.

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Motley Fool contributor Dave Gow has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Platinum Investment Management Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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