With Average Yields up to 13%, You Need International Stocks to Bolster Your Income

Amy Calistri's picture

Monday, April 20, 2009 - 11:04am

by Amy Calistri

 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.

      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.

     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.

Amy Calistri does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.