Double Your Dividends by Investing in Foreign Companies
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

 Triple Digits

While 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 . . .

2007 World Stock Market Returns

 

China:

+180%  
 

Ukraine: 

+135%  
 

Slovenia:

+97%  
 

Nigeria: 

+87%  
 

Pakistan:

+86%  
 

Croatia:

+81%  
 

Brazil:

+72%  
 

Mauritius: 

+70%  
 

India: 

+65%  
 

Source:  Bloomberg

 

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.



The Hidden "Wholesale" Market Where Gold Sells for $418/oz
Traditionally this type of gold investment sells at a lofty premium to gold bullion. But right now it's on sale for -68% cheaper. Market distortions like this never last. When this gold investment snaps back in line with bullion, owners could make a lot of money in a hurry. Details here.
 
FREE six times a week, our newsletter contains actionable investment ideas from today's leading market analysts.




The Next 437 Banks That Could Fail

There are 7,830 banks in the United States -- and 437 are in immediate danger of failing.

If you have cash in any of these banks your savings could be at risk.
 



The Best Stocks to Hold Forever

Few people realize these stocks even exist.

But many of the richest, most successful investors, politicians and businessmen have been quietly cashing in on them for decades

Here's how you can too...

Meet the Experts    Newsletters    Special Offers    Email Preferences    FAQ
About Us    Advertise    Privacy    Disclaimer    Help    Terms of Use


TopStockAnalysts button StreetAuthority button Dividend Opportunities button

(c) Copyright 2001-2010 TopStockAnalysts.com -- All Rights Reserved