Tax Day ETF & Stock Picks for Roth IRA
It’s Tax Day and investors are scrambling to submit 2016 returns and make contributions to their retirement accounts. As per an article published on Seeking Alpha, 15% to 33% of all U.S. taxpayers file at the final moment.
As we know, ‘tax’ has become a buzzword in the U.S. investing backdrop with citizens looking for President Trump’s promised tax reform (or a hefty tax reduction). So, it would benefit all to dig into the retirement products that provide huge tax benefits.
While there are Individual Retirement Accounts (IRAs) where the contributions are tax deductible, investors can also find Roth IRAs interesting for making contributions.
A Roth IRA is a type of individual retirement account, in which after-tax investments can grow tax-deferred as long as they remain in the account, and qualified withdrawals are tax-free. So, this is quite a tax-advantaged means of savings for retirement.
There is definitely a set of contribution rules. But if one qualifies, smart gains are guaranteed. To do so, we would pick some ETFs as they are always more tax efficient than other investment vehicles.
Now, the question is, what kind of securities or ETFs would best fit your Roth IRA. The answer is higher yielding stocks and ETFs. We’ll tell you why.
Benefit of High-Yielding Securities for Roth IRA
Since income distributions kept in the Roth IRA account can be realized tax-free (for the most part), these tools are highly beneficial for high-dividend products. Investors should note that qualified dividends are taxed at the long-term capital gains rate of 20% and nonqualified dividends are taxed at 39.6%.
But if kept in a Roth IRA account, investors can get away with tax on dividend income. Also, tax on capital gains to be paid every year is removed (read: 3 Preferred Stock ETFs Yielding More than 4%).
ETF Picks
Below we highlight two higher yielding ETFs which could be part of your Roth IRA plan.
SPDR S&P International Dividend Currency Hedged ETF HDWX
The fund represents the performance of the 100 highest dividend-yielding common stocks and ADRs listed on primary exchanges of countries included on the S&P Global BMI ex U.S. index. With the global market environment on the mend, a look at this international ETF can be intriguing.
The fund has a double-digit weight in Australia, United Kingdom and Canada. It yields 5.39% annually. The fund added over 3% in the last one month (as of April 17, 2017) (read: Why Did International ETFs Outperform in March?).
PowerShares DWA Tactical Multi-Asset Income Portfolio DWIN
The underlying index of the fund invests in both fixed income and equity income ETFs including those holding investment grade and high yield bonds, fixed-rate preferred shares, dividend paying equities, U.S. Treasuries, MLPs and real estate investment trusts. It shifts between income-oriented segments, based on the market scenario as well as yield criteria.
The fund yields about 4.74% annually and added over 1.8% in the last one month. In the last two years (as of April 17, 2017), the fund was up over 11.7% (read: 4 Hedge Fund ETFs to Counter Geopolitics & Fed Fears).
Stock Picks
Below are two Zacks Rank #1 (Strong Buy) high-dividend stocks with a VGM (Value-Growth-Momentum) score of ‘A.’
Seagate Technology plc STX – 5.23% Yield
The company offers a portfolio of hard disc drives, solid state drives and solid state hybrid drives. It has a Zacks Industry and Sector Rank of top 12% and top 38%, respectively.
TICC Capital Corp. TICC –10.93% Yield
TICC Capital Corp. is a business development company primarily engaged in providing capital to technology-related companies.It has a Zacks Industry and Sector Rank of top 42% and top 38%, respectively.
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Seagate Technology PLC (STX): Free Stock Analysis Report
TICC Capital Corp. (TICC): Free Stock Analysis Report
SPDR-SP INT DCH (HDWX): ETF Research Reports
PWRSH-DWA TMIP (DWIN): ETF Research Reports
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