For those of you unfamiliar with the term ADRs, it stands for American depositary receipt. An ADR is a stock that trades in the United States but represents a specified number of shares in a foreign corporation. ADRs are bought and sold on American markets just like regular stocks, and are issued in the U.S. by a bank or brokerage company.
Do I invest in dividend-paying ADRs? In a word, no. The reason I don’t is because I have enough trouble following the stocks that I currently own. I have written time and time again that for an investor to invest in individual stocks then they need to ensure they have enough time to focus on the analysis of potential stocks to buy as well as the current stocks in a portfolio. Adding in ADRs to an investment mix adds additional risk (more on that risk in a moment) to a portfolio that takes additional time and effort to FULLY understand and make sense of. Watching out for the risks associated with our own local stocks is difficult enough.
Source: The Dividend Guy
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