Published:
March 10, 2008
Imagine going to a
supermarket and shopping in just
half of the aisles, or opening a
restaurant menu and limiting your
dinner choices to the entrees listed
on just one of the pages.
This is essentially what investors
with no foreign exposure are doing with their portfolios.
In years past, most of the world's stock market capitalization was
locked up in the United States. However, trillions of dollars in
market wealth has been created overseas in the past decade, and
there are now actually more opportunities outside our borders than
within.
Take banks, for example. In terms
of assets, seven of the top ten banks in the world are
foreign-based companies. And the story is similar across most
other industries, from retailers to steelmakers to electronics
manufacturers -- many future industry bellwethers are located
outside the U.S.
And aside from a greatly expanded
pool of investment ideas, there are several other reasons to
consider foreign investments. Most importantly, stock prices are
heavily influenced by economic expansion and overall corporate
profitability. And as the world's largest economy (with a gross
domestic product (GDP) in excess of $13 trillion), it is virtually
impossible for the U.S. to deliver the robust growth rates that it
has posted in decades past.
Fortunately, many other
countries around the world are
at far earlier stages on the
economic development path and
should see much higher growth
rates than the United States for
years to come. As you can see
from our chart, while the U.S.
economy is still dominant, it
simply can't match the growth
that is taking place in markets
like China and Russia.
Considering the link between
economic expansion and equity prices, it's not surprising that
U.S. stocks have struggled to keep pace with the rest of the
world.Entire
Markets Surging |
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Triple DigitsWhile the S&P 500 had a lackluster 2007, rising just +3.5%,
just look at the returns posted by other stock markets around the
world . . .
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2007
World Stock Market Returns
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China:
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+180% |
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Ukraine:
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+135% |
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Slovenia:
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+97% |
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Nigeria:
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+87% |
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Pakistan:
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+86% |
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Croatia:
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+81% |
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Brazil:
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+72% |
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Mauritius:
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+70% |
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India:
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+65% |
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Source:
Bloomberg
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U.S. stocks have never moved like this. Never. The highest
one-year gain the S&P 500 ever reported was +45% -- and that
was a lifetime ago . . . in 1954.
In 2007, the S&P 500 didn't even crack the top 50, coming in
76th out of the world's 90 major stock-market indexes.
Dividends
Play a Leading Role
|
On top of eye-popping returns, when you venture off the U.S.
exchanges you also find freakishly high yields.
While U.S. shares pay less than 2%, the average stock in
New Zealand yields more than 7%! And there are dozens of Kiwi blue
chips throwing off 9%, 10%, 11% and more!
Check out my chart and you'll see how much more other markets
yield. And I'm not even including a dozen other smaller markets
that are also paying more than the U.S.
|
 |
Poland, for example, yields 3.6%. Singapore yields 3.4% . . .
Greece, 3.7% . . . Holland, 3.4% . . . and Taiwan,
4.1%. And remember, those are just the averages, weighted down by
large numbers of stocks that don't yield a cent.
According to Jill Evans, manager of the Alpine Dynamic Dividend
Fund (ADVDX), dividend yields on foreign exchanges are currently
running about double the meager average payout of roughly
1.8% among S&P 500 firms -- and fatter quarterly paychecks are
just the beginning.
Whether it's Brazil, Hong Kong, or
Turkey, dividends send the same message in any language.
Specifically, recurring dividends represent millions (or even
billions) in annual payments to shareholders. And companies that
can meet that obligation in both good times and bad can usually be
counted on to deliver consistent cash flows.
Furthermore, dividends can also act
as a built-in safety net in a falling market. As the price of a
stock drops, its yield rises -- thereby attracting investors. This
tends to prop up dividend payers in a down market and can even set
a floor on the share price.
Simply put: dividend-paying stocks
can usually be trusted to deliver above-average long-term returns
with less volatility than the broader market. According to
renowned professor and market researcher Jeremy Siegel, the top
100 highest-yielding stocks in the S&P 500 have returned +3%
more per year on average than the index as a whole.
And if dividends can make that much of a difference in our
low-yield domestic environment, imagine what the generous
double-digit yields commonly found overseas can do for your
portfolio. These are exactly the types of stable, high-yielding
foreign companies StreetAuthority introduces its readers to every month in
its
premium newsletter --
High-Yield
International.
It's the only publication of its kind dedicated exclusively to
finding high-yielding securities in foreign markets. In it, they show subscribers how they can earn steady yields
of 8% . . . 10% . . . even 15% or more by investing
in these foreign millionaire makers.
For instance, in the March issue of
High-Yield
International,
which was published just a few short days ago, editor Nick Lanyi took an in-depth
look at two of the most promising markets for dividend-lovers --
Western Europe and Singapore. In the process, he profiled
several promising high-yielders, including a foreign telecom
with a 10.3% yield. Best of all, to capture this
double-digit yield, investors don't even have to leave the U.S.
markets -- the shares trade right on the NYSE.
And thanks to your status as a
TopStockAnalysts reader, StreetAuthority is pleased to offer you a no-risk 90-day preview of
High-Yield
International. Simply
visit
this link and sign up, and you'll receive the first three
issues with no obligation. |