Published:
September 29, 2008
Data from the past 10 years shows
that a leading international dividend index exceeded the
performance of every major market benchmark. And it has beat out
almost every emerging market, including Brazil, China and
Mexico.
As in the classic story of the tortoise and the hare, the slow
and steady dividend investors came out ahead of colleagues who
focused solely on high growth. The dividend investors' returns
not only were stronger, they also were far less volatile -- an
appealing portfolio trait in today's tumultuous investing
climate.
Let's look at the world's hottest markets for the past 10 years
and show why you should consider the double-digit returns being
offered by the world's best dividend payers.
Consider China. Investors have been hearing about the country
for the past few years. Its industries are booming and its
middle class is emerging -- both of which are powering
remarkable economic growth. It's a fascinating story and China
remains a compelling terrain for investors. But these are the
facts: The Shanghai Index stood at 144.22 on Dec. 31, 1997.
Eight years later, the index read 143.87. The capital investors
sank into China was dead money for all that time. And while
their China investments lay fallow, investors missed out on
opportunities elsewhere. Even the S&P 500 managed a total return
of +45.3% during that time.
A few years ago, investors began to pour billions into China.
The index sprang from 143.87 in 2005 to 342.79 in 2006 -- and
then skyrocketed to 720.36 in 2007. Its annualized rate of
return for the past 10 years was +17.4%.
Impressive, right?
Sure. But the S&P International Dividend Opportunities Index --
the red line on our chart below -- did even better. It delivered
annualized gains of +18.8% -- enough to turn an initial $20,000
investment into an impressive $111,698.
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And notice what happened in late
2002: China's return flattened out
while the dividend index began a
steady climb. When China started to
rise, it took off like the
proverbial hare. But it couldn't
catch -- let alone surpass -- the
tortoise.
Let's look at another hot market and
compare its results with the
dividend index.
Brazil is one of the most vibrant
economies in the world. Its markets
offer the promise of standout
returns.
You can see the uptrend in the
country's benchmark Bovespa Index.
Actually, it's more of an explosion.
Its annualized gain for the 10
years ended December 31, 2007 was a
robust +14.7%. But Brazil's story
mirrors China: Money invested in the
South American nation languished
until the end of 2004. In fact, many
investors in the country took losses
as the market fell as much as -75%
before coming back to the break-even
point.
Now, Brazil's performance for the
last few years also mirrors China,
as Brazil's index shot from below
10,000 to nearly 40,000 in only
three years.
That's a return any investor should
be proud of -- but it's nevertheless
the bottom line of the chart below.
As you can see, the
S&P International Dividend Opportunities Index
reached the Bovespa's high nearly
two years earlier -- and it
continued to rise steadily after
that...
 |
The
S&P International Dividend Opportunities Index tracks 100 non-U.S.
companies. To be included, companies
must be listed on a major exchange, be
profitable, have positive five-year
cumulative growth and a market cap
of more than $1.5 billion. Of all
the companies that meet these criteria,
the 100 highest-yielding companies
are chosen for the index.
Now for how to invest in it...
Would you believe you might only be
a couple of mouse clicks away from
owning all of these 100
outperforming, high-yielding stocks?
The SPDR S&P International Dividend
exchange-traded fund, which trades
under the ticker symbol DWX, allows
investors to buy all the shares in
the index and mirror its
performance. The fund pays dividends
quarterly and has an expense ratio
of 0.45% -- far less than you'd
otherwise pay to buy these
international shares, none of which
are U.S. companies. So far this
year, this fund has paid three
quarterly dividends equaling $4.27.
If that rate of payout continues,
the fund will yield about 11% this
year.
Life's journey is a marathon, not a
sprint. That's the moral of the
story of the tortoise and the hare.
It's a good thing for investors to
keep in mind, too. No one gets rich
quickly -- even lottery winners are
typically paid over time. Slow and
steady wins the race. That's not
just a soothing adage for market
laggards to console themselves with
when justifying lackluster
portfolios. It's a quantifiable fact
of long-term investing. |
