Barron's has an article by Johanna Bennett on The Wide World of Dividend Stocks. Here are some highlights:
In seeking stocks that pay a decent dividend, it's time for investors to go abroad.Disclosure: The Div Guy owns shares of GSK at the time of this post.
Dividends paid by many big overseas firms have held up well over the last few years. And U.S.-listed shares of BP (ticker: BP), China Mobile (CHL), Diageo (DEO), Taiwan Semiconductor Manufacturing (TSM) and GlaxoSmithKline (GSK) remain lucrative options for income-hungry U.S. investors.
"If you only invest in U.S. stocks, you miss a lot of opportunities," says Alan Lancz, president of money-management firm Alan B. Lancz & Associates.
Foreign stocks tend to have more attractive dividend yields. Because overseas firms, much more than their U.S. counterparts, believe in returning more of their excess capital to shareholders, they're often more generous, says Judith Saryan, a portfolio manager with Eaton Vance, who specializes in dividend-paying stocks.
Financial data firm Markit Group sees dividends paid by companies in Europe's Dow Jones Stoxx 600 Index climbing an average of 11% in 2010. Members of Brazil's Bovespa stock index and Japan's Nikkei 225 should generate an average of 10% dividend growth.
Investors in the U.S. often find it inconvenient to trade on overseas stock exchanges. Yet companies that trade shares or American depositary receipts (ADRs) on U.S. exchanges are easy for U.S. investors to buy. ADRs tend to mimic the performance of the corresponding foreign stock, but are denominated and pay dividends in U.S. dollars.
With the help of FactSet Research Systems, Barrons.com found 66 foreign companies with market values above $5 billion and with dividend yields of 3% or higher.
Financial companies were excluded as too risky. We then looked for growing dividends backed by growing earnings.
The highest yield on our list belongs to Europe's biggest oil company, BP -- 6.3%.
Cliff Remily, manager of the Thornburg Investment Income Builder Fund, calls BP "hands down the best allocator of capital in the energy business." Since 1993, the company has steadily expanded oil reserves and spent $118 billion on dividends and repurchasing its own stock.
With a 3.7% yield, China Mobile, China's leading wireless service provider, could raise its payout to investors better than 15% annually through 2014, says Remily.
At 3.5%, Diageo, the world's largest maker of bottled spirits, has the lowest yield on our list.
The global recession has taken a toll on sales and earnings. Yet Diageo remains a global powerhouse with the ability to generate piles of cash and a long history of dividend hikes.
With a yield of 4.7%, Taiwan Semiconductor has paid a cash dividend to investors since 2004.
Ravaged by the global recession, manufacturing plants are humming again. Still, the ADR price has dropped 15% this year amid worries that the semiconductor foundry is being excessive by investing $4.8 billion this year in new manufacturing technology.
But Taiwan Semiconductor has virtually no debt and nearly $7 billion in cash.
And finally, there's GlaxoSmithKline.
Glaxo has the slowest-growing dividend on our list. But it has 100 new drugs and 15 vaccines in development. Profit and free cash flow are growing.
And with a yield of 5.2%, "investors are being paid well to wait," as the company overcomes it challenges, says Linda Bannister, an analyst with Edward Jones.
Because ADRs reflect the value of the corresponding foreign security, returns will get pinched if the U.S. dollar makes a big comeback.
Nevertheless, it's a big wide world, filled with big companies that pay out a fair amount of cash.
