Last week, I told you about the enormous number of high-yielding stocks abroad. I think the amount of international dividend-payers out there is one of the market's biggest secrets.
If you remember, I told you only 18 profitable U.S. companies were paying yields of more than 12%... compared with 412 abroad. The numbers fluctuate day to day, but the trend is pretty clear.
I've researched this topic for years. And the fact is, foreign companies are simply paying higher yields across the board.
If you remember, I told you only 18 profitable U.S. companies were paying yields of more than 12%... compared with 412 abroad. The numbers fluctuate day to day, but the trend is pretty clear.
I've researched this topic for years. And the fact is, foreign companies are simply paying higher yields across the board.
Take a look at the table to the right. You can see the difference between what we get from U.S. companies and what's available from international companies. Keep in mind I only looked at the common stocks of companies that were profitable in the past year.
Truth is, the stocks in the S&P 500 pay an average yield of just 2.0%. This makes us one of the lowest-yielding markets in the world.
But go abroad, and you find something completely different. No, not every country is a dividend stalwart... but there are a surprising number of markets that more than double the yields found here in the United States.
Compare our 2.0% average yield with what I'm seeing in international markets.
According to Bloomberg, Germany's average yield is 3.6%... Brazil's average yield is 4.1%... the United Kingdom yields 3.4%... Australia yields 4.5%... New Zealand pays 4.4%.
Take a look:
As Judy Sarayan, a fund manager at mega-investment firm Eaton Vance explained in simple terms, "There's a much stronger dividend culture abroad... individual investors play a larger role in those markets, and the! y have a lways demanded more dividends."
But there are more reasons to look abroad than just the dividend yields.
In the one-year period between August 2010 and August 2011, the S&P 500 returned 15.9%. This is certainly nothing to sneeze at, but when you look at total performance worldwide, the U.S. market ranked just 36th in the world in that same period.
And during the past five years, the S&P 500 has returned 12.6%. But 34 other countries delivered better stock market returns.
So not only can you find higher yields abroad, but you can also see stronger capital gains.
You see, there's a correlation between economic growth and rising stock prices. The faster the growth, typically the higher the stock market moves. And international markets are where the majority of the world's economic growth is happening.
Look, the United States is unlike any other nation on the planet. It's the largest economy and home to the world's most innovative entrepreneurs. But the simple fact is that the headiest days of our economic growth are behind us.
Why?
It's simply the law of large numbers. With an economy in excess of $14 trillion, growing more than a few percent each year is a major undertaking.
In fact, think back about what we've seen in the past few years. The U.S. government has spent trillions in an effort to stimulate the economy. The Federal Reserve has spent trillions more. Interest rates have been slashed to zero.
And yet, the U.S. economy grew just 2.8% in 2010. Not bad, but only good enough to rank us 117th in the world -- between South Africa and Cameroon -- when it comes to annual gross domestic product (GDP) growth.
Qatar topped this list with 16.3% growth. Singapore saw a 14.4% rise in GDP. Panama, 7.5%... South Korea, 6.1%... Poland, 3.8%... even Germany boosted its GDP at a 3.5% annual rate.
Fact is, more and more income investors are realizing that if they want to give the! mselves the best chance at the "Holy Grail" of investing -- high yields AND rising stock prices -- they need to look at international companies.
> Don't get me wrong -- investing in international dividend-payers isn't a guaranteed winning investment. Nothing ever is. But as I like to say, limiting yourself to only U.S. stocks is like going to a restaurant and limiting your options to just one side of the menu. Sure you can find something you like... but wouldn't you rather see all the options?
