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Dividend Investing Abroad!

 

Submitted by Hao Jin on Mon, 12/07/2009 - 12:07

• Stock Trading

 

Hao Jin, CFA
Contributing Writer

 

14 Foreign Blue Chip Stocks With 5%+ Dividends

 

The Fed model compares the forward earnings yield of the stock market with 10-year government bond yields. The model assumes that investors view stocks and bonds as competing assets and will purchase whichever asset has a higher yield, according to an article in Quarterly Review of Economics and Finance May 2009 issue.

 

Income investors will always be in a dilemma over whether to purchase fixed income securities such as bonds, or to buy stocks with competitive yields. Companies that pay generous dividends tend to perform well in an era of mild inflation.

 

More than half of the total global stock market capitalization is outside of US borders. The reason to have foreign dividend-paying stocks is for income and growth from economies globally, especially in an environment that features a weakening US dollar.

 

14 ADRs With 5%+ Dividends

 

Prospective foreign companies often come to the US for financing, and that means a greater number of investment opportunities for income investors in ADRs.  I went over all foreign companies listed on US exchanges (NASDAQ and NYSE). The following are ADRs with dividends higher than 5%, market caps greater than $1 billion, and forward P/Es lower than 15:

 

 

Name (Symbol)

Forward P/E (1yr)

Yield

Market Cap

MAGYAR TELEKOM (MTA)

10

19%

4.17B

ENERSIS S A (ENI)

13

11%

637.41B

TELECOM CP N Z (NZT)

13

10%

2.05B

Partner Comm (PTNR)

3

8%

2.94B

DEUTSCHE TELE AG ADS (DT)

13

7%

68.09B

CPFL ENERGIA SA ADS (CPL)

13

7%

9.94B

FRANCE TELECOM ADS (FTE)

10

6%

70.66B

HELLENIC TELE ADS (OTE)

9

6%

7.74B

BP PLC (BP)

9

6%

180.71B

ECOPETROL SA (EC)

15

6%

52.17B

MOBILE TELSYS OJSC (MBT)

10

5%

18.84B

TOTAL S.A. (TOT)

9

5%

142.22B

PORTUGAL TELECM SGPS (PT)

14

5%

11.07B

TELEFONICA SA (TEF)

10

5%

132.75B

 

Not surprisingly, these companies are either in the telecom sector or energy related industries. They yield plenty, and many have some solid fundamentals to vouch for as well.

 

Telecom

The US telecom market is mature with very little growth out there. However, there are still more opportunities for foreign telecom companies, especially in emerging markets.

 

Magyar Telekom (MTA) provides telecommunication services in Hungary and internationally. Partner Communications (PTNR) operates a mobile telecommunications network in Israel. Hellenic Telecommunications (OTE) is a telecommunications services provider in Greece, Albania, Bulgaria, and Romania.

 

Mobile Telesystems (MBT), the Russian mobile telecom company, became a mobile/land-line provider this week with the purchase of COMSTAR-UTS. This gives it an entry into broadband - one of the country's underdeveloped markets. Russia has vast stores of oil and gold, the world’s 3rd largest currency reserves, and a relatively low net debt-to-GDP ratio.

 

Telecom Corp. of New Zealand Ltd. (NZT), Deutsche Telekom (DT), FRANCE TELECOM (FTE) and Telefonica SA (TEF) are all in developed markets. Portugal Telecom (PT) is investing heavily in a fiber network and TV service in Portugal and in 3G & 3.5G technology in Brazil.

 

Utilities/Energy

 

Enersis S.A. (ENI) engages in electric power generation in Argentina, Brazil, Chile, Colombia, and Peru. CPFL Energia S.A (CPL) serves residential, industrial, and commercial customers in Brazil.  Ecopetrol S.A. (EC) is a crude oil and gas giant in Columbia.

 

Main International ETFs With 5%+ Dividends

 

Name (Symbol)

Yield

WISDOMTREE EX-FINL (DOO)

12%

WISDOMTREE PACFC EQ (DNH)

10%

WISDOMTREE DEFA (DTH)

9%

WISDOMTREE PAC TTL (DND)

9%

WISDOMTREE EUR TDIV (DEB)

8%

WISDOMTREE INTL LC (DOL)

8%

WISDOMTREE DEFA (DWM)

7%

WISDOM TR EM MKT (DEM)

7%

VANGRD EUROPEAN ETF (VGK)

6%

 

Conclusion

 

An investor who missed the 10 best performance days out of 110,000 trading days would have had a portfolio that was 69% less valuable than a passive portfolio. Avoiding the 10 worst days would have resulted in a portfolio that was 337% more valuable than a passive investment, according to an article titled “Black Swans in Emerging Markets” in Journal of Investing Summer 2009 issue.

 

When a crisis strikes, the people who sell first get the best price, if they can move ahead of a wave of forced sales.  If you are not a trader or can’t time the market, the best way is to find solid-yielding companies and stay invested.

 

Fundamental metrics such as P/E and dividend yields are too narrowly focused to stand alone as a single measure of a stock.  Inconsistent dividends in the past mean that the dividend yields can't be counted on.  By combining different methods of valuation, you can get a better view of a company.

 

Disclosure: I have long position on CPL.   Data is from Yahoo Finance as of December 4, 2009.

 

 

About the Author

myWealth.com provides affordable, online personal finance courses that enable everyone to effectively manage their money by making sound financial decisions. Making sound decisions is a prerequisite to achieving your financial goals and becoming financially secure. myWealth.com offers numerous courses that cover investing, managing ones personal finances and currency trading.

myWealth.com's team of instructors, led by Sean Hyman and Bob O'Brien, pride themselves in thoroughly answering questions and patiently guiding each and every student through the course. Our instructors have years of experience trading various financial markets. They also have years of experience providing financial planning advice to individuals like you.

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