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The average stock in the S&P 500 Index sports a dividend yield of just
4%. But in many countries around the world, the average
stock offers a significantly higher yield. In Australia, the
average yield is +73% higher than it is the U.S.; in Taiwan,
it's +173% higher; and in Italy, it's an astounding +220%
higher.
This is a BIG
difference. Even without any capital gains or increases in
dividends, it's the type of difference that'll keep you in
Ford or catapult you into a Maserati.
Let's
say you invested $100,000 into something yielding 4.1% --
what you get in the U.S. At
the end of 30 years, you'd have (assuming you reinvest your
dividends at that rate) $320,000. At 13.1%, the rate Italy
now offers investors, you'd have $3.9 million.
That's a difference
of $3.6 million dollars!
Why do American
companies rip off American investors by hording billions of
dollars in earnings year after year? Because they can.
|
Country |
Yield
|
|
Italy
Taiwan
Spain
New Zealand
Australia
France
Germany
U.K.
U.S. |
13.1%
11.2%
7.7%
7.7%
7.1%
6.9%
6.9%
6.9%
4.1% |
Until 2003 the U.S. government taxed dividends as ordinary income --
creating an incentive for companies to use excess cash in other ways. It's
simply part of U.S. corporate culture for CEOs and directors
to make acquisitions, repurchase shares or expand the
business rather than pay dividends to shareholders.
Also, many of the largest foreign companies derive from or remain state-owned entities or regulated monopolies. These types of enterprises tend to grow slowly but steadily. As a result, they can reward their shareholders with high current income in lieu of significant share price appreciation.
And,
the largest companies in emerging markets need to offer
higher-than-average yields to attract foreign investors.
They realize that the high growth potential they offer to
investors is mitigated somewhat by the above-average
volatility associated with emerging markets. So they offer
high dividend payments to entice investors from developed
countries, including deep-pocketed institutional investors.
The bottom line is that investors looking for stable, high-yielding investments,
you cannot afford to overlook the vast array of choices overseas.
Some of my favorites
right now include a 10.3% yielding Brazilian telecom with
90% of the fixed-line market in Brazil's most affluent state
and a 16.5% yielding bank with a strong cash position and a
fast-growing presence in China.
Good Investing!
Nick Lanyi
Editor -- StreetAuthority High-Yield International
P.S.
I am continuing to
identify attractive high-yielding investments around the
world that I think offer the potential for outsized gains over the next year or two.
If you'd like to receive
in-depth coverage of today's most compelling international
income opportunities, I recommend you check out my monthly
newsletter
here.
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