A Better Path To Global Diversification

Nathan Slaughter's picture

Monday, January 16, 2017 - 12:00am

by Nathan Slaughter

When it comes to international exposure, investors have literally thousands of mutual funds, closed-end funds, and exchange-traded funds to choose from. European small-cap stocks, Latin American dividend stocks, Asian government bonds -- you name it.

Vanguard alone offers 19 different equity funds with either global or purely foreign portfolios.

But investing in individual securities is a different matter entirely. While the introduction of online trading platforms has facilitated the buying and selling of foreign stocks, it's still an onerous process. Many brokers can't help you buy shares of a company trading on the Toronto Stock Exchange, for example -- and Canada is a relatively accessible market.

Want to buy or sell a stock on exchanges in Copenhagen, Stockholm, Brussels or Tokyo? You'll have to submit specific paperwork and pay substantially higher brokerage commissions. There will also be foreign currency exchange fees if you choose to settle positions in U.S. dollars, as well as foreign tax withholding in some countries.

Heck, even getting a ticker symbol and price quote can be tricky.


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Fortunately, there is a much easier route. Many outstanding foreign businesses from around the world have their stock listed in the United States through American Depositary Receipts (ADRs). In short, these bank-issued certificates represent a stake in actual foreign stock but trade locally in the United States.

Despite the fact that they represent shares of foreign entities, ADRs are issued in U.S. dollars. They also pay dividends in U.S. dollars, although the amounts can fluctuate depending on currency translation (either in or against your favor).

ADRs benefit investors by providing global diversification and more convenient ownership of shares in foreign firms. Many of my High-Yield Investing subscribers are already familiar with a few of these securities, such as oil giant BP (NYSE: BP), which is headquartered in London.

In the table below, I've compiled a short list of a dozen more high-quality ADRs with reasonable valuations, solid balance sheets, clear growth outlooks and hefty dividend yields of up to 5.7%. While these aren't necessarily recommendations for you to invest in today, they should give you an idea of the kinds of opportunities that are out there if you're willing to look.

There are many reputable names in this group, and we could devote an entire issue to each of them. As I mentioned earlier though, this stock screen is simply meant to dig up ideas for further research -- these shouldn't necessarily be considered actual recommendations.

Some of these securities may make better investments than others. You should also evaluate the fundamental characteristics of every potential investment opportunity. In addition, you should assess how well a particular stock or fund matches your investment needs. Do your own due diligence on a security to decide if it is right for your portfolio, just like you would with a domestic stock.

That said, I am always on the lookout for new candidates for the international section of my High Yield Investing portfolio. For these picks, I look for companies outperforming their industry or domestic economy. From there, I can investigate the company further to provide readers with solid, well-researched recommendations. And several of the dominant industry leaders above are on my short list.

The most promising in my view is Grupo Aeroportuario del Centro Norte (Nasdaq: OMAB), which was granted a 50-year operating concession (another word for "monopoly") when Mexican regulators decided to privatize the nation's main airport hubs in 1988.

OMAB operates 13 airports, including those in busy cities such as Monterrey. It receives fees for every flight that arrives or departs from these facilities. There are two other Mexican airport owners, but OMAB is free from competition in the central and northern parts of the country -- which gives the company a wide moat. It also has more than double the dividend yield of its two peers.

While OMAB's air traffic is more domestic than foreign, it does operate coastal airports in Acapulco and Mazatlan, both of which receive an influx of vacation travelers. The dramatic weakening of the peso following the U.S. Presidential election should help bolster tourism.

The stock is trading near a 52-week low, despite a strong double-digit surge in terminal passenger traffic in recent months. I think a rebound to $40, coupled with the impressive 5.7% dividend yield, could provide attractive total returns over the next 12 months.

OMAB is just one of many examples of market-crushing yields I look for each month in High-Yield Investing. This newsletter is dedicated to bringing income investors the highest-paying and most stable stocks, bonds and funds on the market. Each issue is filled with a bevy of income choices yielding 8%... 10%... even 12% or more!

If you're interested in getting access to my full portfolio, along with names and ticker symbols -- including my in-depth analysis -- I invite you to go here.

Nathan Slaughter 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.