Given the efficiency of the S&P 500 over the previous couple of years relative to the FTSE 100, buyers on this aspect of the pond have been . That’s pure, particularly as the favored theme of AI has been pushed by shares listed within the US. But in terms of passive earnings technology, is it the identical case, that I ought to be attempting to purchase US shares for the very best potential yield?

Differing views

The primary option to reply the query is to take a look at the common dividend yield for the 2 main indexes. The S&P 500’s common yield is 1.21%, and the FTSE 100’s is 3.51%. So, if I merely needed to purchase an index tracker that distributed earnings, I might make the argument that I ought to select the UK choice. If I invested £10,000, the financial distinction between the 2 choices over the course of a 12 months could be £230.

Nevertheless, under the floor, issues are extra difficult. For instance, a portfolio concentrating on the half-dozen highest-yielding choices utilizing S&P 500 shares would yield 7.03%. For the FTSE 100, the common yield could be 8.61%. Once more, the UK could be the higher choice if somebody have been attempting to implement this technique.

The actions within the share price should be taken in account when contemplating dividend earnings. Adjustments within the inventory price can both add to the general revenue or negatively have an effect on the dividends. During the last 12 months, the FTSE 100 has been up 8.6% in comparison with 6.43% for the S&P 500.

So by taking a look at three totally different angles, the UK inventory market appears to be extra engaging. In fact, there are different methods to take a look at the 2 markets, so this isn’t a definitive reply. However I’m pleased to speculate predominantly this aspect of the pond for the dividend a part of my portfolio.

UK potential

If an investor desires extra publicity on this space, HSBC (LSE:HSBA) is one inventory to think about. The worldwide financial institution has a dividend yield of 5.76%, with the share price up 43% over the past 12 months.

The enterprise carried out effectively in 2024, even in opposition to the backdrop of an honest 2023. Revenue earlier than tax rose by £1.55bn to £25.03bn, regardless of a lower within the web curiosity margin. Causes for the increase included greater buyer exercise within the Wealth Administration division and extra Securities Financing enterprise. It’s true that there was a kick greater from the sale of the Canadian entity, and this was a one-time revenue affect that gained’t be repeated.

Funds imply that I don’t see the dividend as being underneath any menace for the approaching 12 months. Wanting forward, HSBC is pushing forward with extra enlargement in Asia. I see this as a very good transfer, as over half of earnings for the group come from this area.

One threat is that web curiosity earnings might hold falling this 12 months, as central banks, together with the US Federal Reserve, the European Central Financial institution, and even the Financial institution of England, are anticipated to cut back their base charges additional. But, with cautious planning, this threat might be managed.