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Published: April 6, 2009
The average stock in the S&P 500 Index
sports a dividend yield of just 4%. But in many countries around the
world, the average stock offers a significantly higher yield. In
Australia, the average yield is +73% higher than it is the U.S.; in
Taiwan, it's +173% higher; and in Italy, it's an astounding +220%
higher. This is
a BIG difference. Even without any capital gains or increases in
dividends, it's the type of difference that'll keep you in Ford or
catapult you into a Maserati.
Let's say you invested
$100,000 into something yielding 4.1% -- what you get in the U.S. At the
end of 30 years, you'd have (assuming you reinvest your dividends at
that rate) $320,000. At 13.1%, the rate Italy now offers investors,
you'd have $3.9 million.
That's a difference of
$3.6 million dollars!
Why do American
companies rip off American investors by hording billions of dollars in
earnings year after year? Because they can.
|
Country |
Yield |
|
Italy
Taiwan
Spain
New Zealand
Australia
France
Germany
U.K.
U.S. |
13.1%
11.2%
7.7%
7.7%
7.1%
6.9%
6.9%
6.9%
4.1% |
Until 2003 the U.S.
government taxed dividends as ordinary income -- creating an incentive
for companies to use excess cash in other ways. It's simply part of U.S.
corporate culture for CEOs and directors to make acquisitions,
repurchase shares or expand the business rather than pay dividends to
shareholders.
Also, many of the largest foreign companies derive from or remain
state-owned entities or regulated monopolies. These types of enterprises
tend to grow slowly but steadily. As a result, they can reward their
shareholders with high current income in lieu of significant share price
appreciation.
And, the largest
companies in emerging markets need to offer higher-than-average yields
to attract foreign investors. They realize that the high growth
potential they offer to investors is mitigated somewhat by the
above-average volatility associated with emerging markets. So they offer
high dividend payments to entice investors from developed countries,
including deep-pocketed institutional investors.
The bottom line is
that investors looking for stable, high-yielding investments, you cannot
afford to overlook the vast array of choices overseas.
Some of my favorites
right now include a 10.3% yielding Brazilian telecom with 90% of the
fixed-line market in Brazil's most affluent state and a 16.5% yielding
bank with a strong cash position and a fast-growing presence in China.
Good Investing!
--Nick Lanyi
Editor
High-Yield International
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