Passport To Dividends
One mistake many dividend investors make is limiting their hunting ground to small segments of the market. The Forecasts suggests casting your net as wide as possible when scouting for stocks, including dividend-payers.
Of course, you need a tool capable of mining a big universe of stocks to find the gems, and the Forecasts believes it has such a tool with our Quadrix® stock-rating system. Quadrix ranks more than 4,000 U.S.-traded stocks based on dozens of variables. Of these companies, 408 are located in foreign countries. For a list of all those foreign stocks, visit www.DowTheory.com/Go/Foreign. Quadrix offers dividend investors an excellent tool for expanding their search outside the U.S.
The table below lists seven foreign companies with shares that trade on U.S. markets. All of these foreign dividend payers earn Overall Quadrix scores higher than 70 (out of a possible 100).
Here are a few things investors should know before they buy foreign dividend-paying stocks:
• Foreign stocks that trade on U.S. exchanges (most often in the form of American depositary receipts, or ADRs) pay dividends in U.S. dollars.
• Dividends on most ADRs are considered “qualified” and thus subject to the current preferential tax rate on dividends, a maximum of 15%.
• Many foreign stocks pay dividends once or twice a year, less frequently than the quarterly payment schedules common for U.S. companies.
• Currency exchange rates affect the dividends of foreign stocks, so future dividends may differ from the amounts listed in the nearby table.
• A portion of dividends paid on international stocks may be withheld for tax purposes, although investors can file for a foreign tax credit.
Two especially attractive companies in the table are Novo Nordisk ($86; NVO) and Rogers Communications ($36; RCI).
Denmark’s Novo Nordisk is the world’s largest diabetes-care company. Given the rapid growth of diabetes throughout the world — the World Health Organization estimates the number of diabetics will exceed 350 million by 2030 — demand for Novo Nordisk’s products should remain strong. The company’s dividend has risen annually since 1996 and more than doubled since 2007. While Novo Nordisk is not among the companies covered in the Forecasts, the stock ranks among the more attractive international dividend payers.
Rogers Communications is a leading media and telecommunications company in Canada. The stock yields 3.3%, a healthy premium to the S&P 500 Index’s 2.1% yield. A fairly modest dividend payout ratio (40% of trailing earnings) and strong earnings momentum should fuel continued dividend hikes. The stock has pulled back in recent trading and represents a top selection. Quarterly results for Rogers, a Focus List Buy and Long-Term Buy, are presented in Portfolio Review.
Investors can diversify their holdings in foreign dividend-payers via exchange-traded funds. One ETF that focuses on international stocks is SPDR S&P International Dividend ($51; DWX). Yielding 6.2%, this ETF’s major sector exposures include financials (24%), industrials (25%), and utilities (16%).