Is Now a Good Time to Buy European Stocks?
Now that the Euro is at lovely cheap levels against the pound, it’s like there’s a super hot sale going on in the stock market. I have therefore been thinking about investing in Euro denominated companies, even more so because the US $ is too strong against the £ for me to justify investing more money in American stocks. But should I invest in European stocks? I mean the shares would be pretty cheap from an exchange rate perspective, but:
- are there any fabulous companies out there that would be more worthwhile investing in than British or US stocks?;
- what about any withholding taxes I might not be able to get back?
Problems of Investing in European Stocks
No More Waffles has recently started maintaining a Euro Dividend All Stars spreadsheet, much along the lines of Dividend Life’s fantastic resource, the UK Dividend Champions spreadsheet. Yet one of the problems with the European version is the lack of lengthy dividend growers. Many companies maintain, rather than increase their dividend year-on-year, meaning that once you’ve taken inflation into account, you’re potentially left with less money. One of the few European stocks that is a strong contender for my investment money is Munich Re, who were coincidentally recently analysed by No More Waffles just yesterday in his most recent post. Another is BMW, but not really due to dividend growth, but rather because I just believe in the marque and think they’re the best 😉
How to Claim Back Withholding Tax on European Dividends?
My main qualm about investing in European stocks is the withholding tax (WHT). It is pretty annoying that dividends are taxed before they even reach your account. However, it then gets even more annoying that you might have to go through some horrendous tax reclaim forms and faff about to claim back some/all of the tax. I have found useful resources for claiming tax back in your NISA or SIPP accounts, such as this resource. But, since I hate both getting taxed, and filling in boring and annoying forms, I often wonder whether I should just buy into a European tracker instead. I could even get a currency hedged fund, thus keeping more of the potential gains. This is actually what I did in my SIPP recently – I just bought a European fund. My SIPP has no dealing charges for funds, but a hefty charge for dealing in shares of any stock, international or otherwise.
Should I Invest in European Stocks?
So, my questions go over to you dear reader – would you invest in European stocks? Would you use a fund or invest in shares of individual stocks? What would you do about WHT? Let me know, leave a comment below.
photo credit: bplanet/freedigitalphotos.net