Foreign Stock Dividends: A Guide for Malaysian Investors
One of the returns you can earn through stock investing is dividends.
A dividend is a portion of a company's profits that is paid out to shareholders. These profits may come from the sale of products or services, or from profitable investments.
Dividends are distributed to investors based on how many shares they hold in the company.
Dividends are paid by companies according to their financial capability, as determined through discussions by the company's management. Some companies pay dividends annually, whilst others pay them quarterly.
Why Do Investors Choose Dividend Income?
Investors who choose dividend income are typically looking for stable passive income. By purchasing dividend-paying stocks, they can receive regular income from their investments without needing to sell their shares.
Dividend income can also help protect investors from share price declines, as the returns from dividend payments can help maintain the value of their investment.
Foreign Stock Dividends
If you hold shares in a foreign company that pays dividends, will you receive those dividends?
If you invest using an Mplus Global account, you will open a Nominee account.
A Nominee account is registered under the broker's name, whereas a Direct account is registered directly under the investor's name. Shareholders holding shares through a nominee account are still eligible to receive dividends.
However, the dividends received will first have a percentage deducted to pay the broker before being distributed to the shareholder.
Where Do the Dividends Go? Bank Account or Trading Account?
This is the most common question, and the answer differs between local and foreign stocks.
Bursa Malaysia stocks (direct CDS account)
Dividends are paid straight into the bank account you registered. They do not go into your trading account, and a trust account does not receive dividends either. If your bank account has changed, update it first through the Bursa Anywhere app or your broker form, because payment follows the bank details held in Bursa records.
Foreign stocks through M+ Global (nominee account)
Dividends are credited to your M+ Global trading account, in the currency of the stock (for example USD for US stocks) rather than directly to your bank account. The full path looks like this:
Company → custodian / nominee → M+ Global → the shareholder account (you)
Because the dividend passes through several layers before it arrives, it is recorded inside the M+ Global app and not on your bank statement. Once credited, the balance can be reused to buy more shares, or withdrawn to your bank account through the normal withdrawal process.
| Bursa stocks (direct CDS) | Foreign stocks (M+ Global, nominee) | |
|---|---|---|
| Eligible for dividends | Yes | Yes |
| Dividend credited to | Registered bank account | M+ Global trading account |
| Currency | Malaysian Ringgit | Currency of the stock (e.g. USD) |
| Main deductions | No broker charge on the dividend payment | Withholding tax (30% for US stocks) and custodian charges |
| Where to check | Bank statement and registrar letter | Records inside the M+ Global app |
How much is deducted before it arrives?
For US stocks, the largest deduction is the 30% withholding tax charged by the IRS on the dividend value. Malaysian investors pay the full rate because Malaysia has no bilateral tax treaty with the United States. You will also need to complete the W-8BEN form when opening the account to certify your non-US resident status, and that form is valid for 3 years.
On top of tax, the custodian applies its own charges before the remaining dividend is credited. The full rate breakdown is in Mplus Global Stock Trading Costs, and the full list of what to understand before investing in the US market is in Investing in US Stocks from Malaysia.
Conclusion
In conclusion, dividend income is a popular investment approach amongst investors seeking stable passive income. The same applies to foreign stock investors. Foreign shareholders still receive dividends according to the amount distributed by the company, though a small deduction will apply if the account registered is a nominee-type account.
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Frequently Asked Questions (FAQ)
1. Do Malaysian investors receive dividends from foreign stocks?
Yes, Malaysian investors holding foreign stocks are eligible to receive dividends. If you invest through a nominee account such as Mplus Global, dividends will be paid to your account after broker fees are deducted.
2. What is the difference between a Nominee account and a Direct account?
A Nominee account is registered under the broker's name, whilst a Direct account is registered directly under the investor's name. Both types of accounts are eligible to receive dividends, but nominee accounts may have additional broker deductions.
3. Are there any charges on foreign stock dividends?
Yes, when dividends are received through a nominee account, the broker will deduct a percentage as a handling fee before distributing the remaining amount to the shareholder. Withholding tax may also apply depending on the country of origin.
4. How often are foreign stock dividends paid?
Dividend frequency varies by company. Some companies pay dividends annually, others semi-annually or quarterly. The schedule depends on the company's dividend policy and its board of directors' decision.
5. Do foreign stock dividends go to my bank account or my trading account?
For foreign stocks held through M+ Global, dividends are credited to your M+ Global trading account in the currency of the stock, after withholding tax and custodian charges. This differs from Bursa Malaysia stocks held in a direct CDS account, where dividends are paid straight into your registered bank account.
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