Is Volkswagen a good stock to buy right now?
Some good news from Volkswagen showing rising car sales, despite a pandemic, and nice profitability. As an added bonus, electric car sales are up, and the company gets it that electric vehicles are the future, sooner rather than later. The only ding from analysts was one analyst saying he was worried that the company was spending too much on R&D. This is small minded, short-term thinking. Block that dude, and move on.
The real potential problem is the chip shortage that is affecting all card manufacturers will likely hit Volkswagen too. This means that the company won’t be able to make enough vehicles to continue increasing sales. This guidance to lower sales is the reason the stock is down. As long-term investors interested in a dividend, this is a short-term problem overly focused on by a stock analysis and stock new industry obsessed with short-term stock prices. That means its time for some tire kicking from actual investors.
The upside to this that no one is talking about is that the vehicles they can sell will likely sell at higher prices due to decreased supply. That means higher profitability per unit.
The catch to this drop in Volkswagen’s stock price is that is comes on the back of recent rise from the 180s to the high 200s. So, a “drop” to €259.60 isn’t exactly a freefall. In fact, at this price the dividend yield still comes in short of 2% at around 1.83%.
I might really like VW here knowing that there is some downside, but long-term this stock will likely trade at a profit growing forward while we collect a “this close” 1.83% dividend.
Buying European Stocks
Is is not hard to buy foreign stocks. There are really two ways to go about it. The first way to invest in European stocks is the buy the company’s ADR. ADR stands for American Depository Receipt and it essentially a holding company made by an U.S. bank that holds real European stock shares in a basket and thn sells parts of that basket onto American investors, passing through all dividends and splits and stock price changes.
You can also buy European stocks directly on European stock exchanges via most full-service U.S. brokerages, including discount brokerages like Fidelity and E-Trade. With both firms, you have to enable your account to invest in international stocks, but it is a trivial process. Then you can buy actual Volkswagen shares instead of the Volkswagen ADR.
The catch to buying international or foreign stocks is that you have to pay taxes on the dividends both here AND where the stock is from. So, in this case, you have to pay the usual stock dividend tax of 0%, 15%, or 20%, depending upon your income, PLUS whatever the German dividend tax is. You can tell by that “whatever” that I don’t typically invest in foreign stocks unless they are best European dividend stocks to buy now. Although U.S. taxes will allow you to refund the foreign tax, that takes more paperwork, more forms, and harder tax filings. Is that worth is for 1.83%, probably not.
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Best European Dividend Stocks to Buy Now
There are actually some really great European stocks paying higher dividends that might be worth putting up with the extra tax hoops, and currency issues, but Volkswagen isn’t one of them right now.
But, here is the catch, back at the beginning of March when Volkswagen was trading for €170 its dividend rate was 2.5%. — Now, I’m listening for a manufacturing company with increasing sales, an eye on the future, and a solid spend on research and development even while paying a 2.5% cash dividend. That might even be worth clicking that YES, I have foreign income button on TurboTax for, especially, if I end up collecting some of the other top European dividend stocks to buy now.
Just keep you foreign stock buys through one broker so you don’t track down a bunch of different foreign dividend forms. Remember just because you don’t see the option to by actual foreign stock shares on the front page of your trade screen doesn’t mean it isn’t there. You may just have to activate it. You likely will have to buy full shares. Most of the micro-brokers like Stash and Robinhood don’t offer foreign stocks except as ADRs, and those usually aren’t available as partial shares. Likewise, you won’t get Stock Slices from Fidelity on non-U.S. exchange stocks.