Many ASX investors like to hold US stocks in their ASX share portfolios. This is understandable. While the ASX is home to many top companies, it simply cannot match the calibre, scope, scale, and dominance of the United States' best shares.
If we put up the likes of Telstra Group Ltd (ASX: TLS) and Commonwealth Bank of Australia (ASX: CBA) against Amazon or Alphabet, the contrast is obvious.
Yet ASX shares do offer Australian investors something that most US stocks don't: Decent dividend yields that come with full franking credits attached.
US stocks have never quite matched the income-generating prowess of ASX shares. Alphabet and Amazon are great examples. Despite being two of the largest and most profitable companies in the world, Alphabet currently sports a dividend yield of around 0.5%. At the same time, Amazon has never even paid its shareholders a dividend.
If you wanted to add the likes of Alphabet, Amazon, or perhaps Microsoft or Mastercard to your ASX share portfolio, you would have to do so in the knowledge that you won't be getting much in the way of income from your investments.
Well, that's only if you buy the shares directly.
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Getting a 5% dividend yield from US stocks like Amazon
There is another way to achieve a significant income stream from US stocks, one that I myself follow. It's by buying shares of listed investment company (LIC), MFF Capital Investments Ltd (ASX: MFF).
MFF is an LIC that was originally part of Magellan Financial Group Ltd (ASX: MFG). Today, it is run by Magellan co-founder Chris Mackay and has a reputation for quiet success in investing in US stocks.
Mackay follows a Buffett-like approach with MFF, buying shares of quality US stocks at prices that make sense, and then holding them indefinitely. Most of the holdings in its portfolio, which include Mastercard, Visa, Amazon, American Express, Alphabet, and Microsoft, have been held for many years.
Yet none of these stocks pay out meaningful dividends. However, that hasn't stopped MFF from establishing its own stream of dividend income for shareholders, funded by small sales and portfolio rebalances.
Over the past few years, MFF has been ratcheting up these dividends considerably. In 2021, the company forked out an annual total of 6.5 cents per share in payouts. By last year, that had risen to 13 cents per share. MFF is on track for 16 cents per share in 2025.
This gives MFF a current dividend yield of 3.5%, which grosses up to a chunky 5% if we include the value of MFF's full franking.
I love holding MFF shares in my portfolio for this very reason. You can get exposure to some of the world's best businesses, alongside a stream of dividends that would otherwise be unavailable if one were to buy the individual shares directly.
