Is there Money Overseas?

While pondering on what to share this week I remembered this  stock that I placed in our portfolio last week to give us some overseas exposure.  It is a stock in a country where most of their companies pay out dividends and at present it has a 10.64% dividend yield.  Dividends from overseas is a great way to diversify some of your holdings by purchasing out of the United States while yet still being able to purchase them on our Exchange. 

Follwing is an article that I would like to share from the Wall Street Journal by Ms Reshma Kapadia and her findings on Overseas investing.  She agrees with me that the stocks that pay the biggest dividends on the market today probably aren't where you think. They're mostly outside the U.S.

Nice steady dividends have taken on a newfound shine in recent years. A company's ability to pay a dividend is "an indicator of management's confidence in the future of the business, which is really important in this climate," says Causeway International Value co-manager Harry Hartford.  Fund managers who focus on dividends and other investment pros say many foreign companies pay bigger dividends than U.S. businesses today.

Companies in Europe have a culture of favoring dividends over buybacks, and an investor base that demands a payout. Companies in Asia and emerging markets in general, meanwhile, increasingly see dividends as an important tool to attract capital and boost confidence in their prospects.

YOU ASK, HOW DO THEY COMPARE

So, the 2% average dividend yield for companies that make up the Standard & Poor's 500-stock index may look attractive compared with the recent yield of 2.6% on the 10-year Treasury bond.

But the average payout for the MSCI World index excluding the U.S. is almost 3%; dividends for companies in the euro zone average 3.5%; and in so-called frontier markets—places like Nigeria and Indonesia, with less liquidity and greater risk than more established emerging markets—the average is 4.1%.

Investment professionals say foreign stocks also have a better outlook for dividend increases, helped by earnings growth prospects—especially in emerging markets—and the recent adoption of dividend policies in parts of Asia.

Over the past fiscal year, dividend growth for the world outside the U.S. has averaged almost 11%, with Europe coming in at nearly 16%. That compares with about 5% growth in the U.S., according to MSCI.

One way to profit from the higher rates available abroad is through international dividend funds. In addition to bigger dividends, they offer an income stream from a geographically diverse base of companies, some of which operate in markets not affected greatly by the recent global downturn. Some funds also include emerging-markets and frontier-market plays.

CAVEATS

While there seem to be plenty of downsides to overseas dividends, including currency fluctuations, which can dent the value of a payout if the dividend's base currency falls in relation to the dollar. Some funds hedge against this risk, though. Foreign companies also have a tendency to issue special dividends when profits are exceptional or the company has amassed a heap of cash, which can muddle investors' efforts to determine normal yields.

Another danger: Many foreign companies link their dividends to a percentage of earnings, meaning dividends can fall abruptly when earnings do. Fund managers look for companies that set a floor for their dividends. Still, overseas dividend income streams can vary more than their U.S. counterparts.

With all of that being said there is still money to be made in the Overseas Market with dividends.  Another good place to look at Overseas involvement in dividend paying companies is in the Emerging Markets area.  Dividends are probably not the reason many investors look for opportunities in emerging markets, but there are plenty of good payouts to be found.

"In some of these markets, information in companies is difficult to obtain, so when a company pays a dividend it speaks volumes about management's views and credibility," says David Ruff, manager of Forward International Dividend. His fund has shares of Turkish dairy Pinar Sut Mamulleri Sanayii AS, yielding nearly 10%, and Nigerian Breweries PLC, paying about 5%.

Shares of companies in emerging markets can be volatile when liquidity is poor. But investors have been moving into countries like Indonesia and Thailand where consumer spending is on the rise.

Some of Thailand's biggest companies pay yields of 5% to 6% and appear likely to increase those, says Mr. Harriss. Thai companies make up 15%, the third-largest weighting, in the Guinness Atkinson Asia Pacific Dividend fund.

The company that we added to our portfolio is a Chilean based company that is traded on the NYSE and it has been paying dividends since 1990.

Of course if you don't have the time, we've done all of the leg work for you with a money back guarantee at Suburbantrader.info

May your investing be profitable.

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