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Being on the lookout for foreign stocks that might fit in the Protected Principal Retirement Strategy portfolio, I investigated a few that have been on my view screen for several months now.

In the past we have invested in a few overseas utility stocks (primarily Brazil and Argentina) that have both performed well and paid superior dividends. I have little, or no confidence in the future of Argentine investments, so I opted to expand my horizon to include large cap European companies.

By "utilities" I consider companies that provide one, or more of the following: natural gas, electricity, water and waste management services. Telecoms are a whole other realm for me, and I place them in a separate category.

My research uncovered four potential candidates:

E.ON SE

EONGY is a $33 billion mega cap utility based in Germany. It generates gas and electricity (coal and nuclear), wind, biomass and solar power. I addition it is an oil and gas exploration company. It serves the U.K., Russia and most of Northern Europe.

From a fundamental standpoint, EONGY's price/sales and price/book ratios are both below 1.0 (excellent). Operating margins are above four percent and return on investment is close to seven percent. For the year ending December 2012, it earned $1.51 for a price/earnings ratio of just over eleven. EONGY's present book value is $23.74. EONGY pays an annual dividend, which in recent years has been paid in May. Over the past five years, the dividend has ranged from a low of $1.31 to a high of $2.12. In 2013, the payment was $1.42.

GDF Suez S.A.

GDFZY (French) is pretty much the mirror image of EONGY insofar as its business mix. In addition to the U.K. and Northern Europe, GDFZY has a presence in the U.S., Africa and Indonesia. It is also involved in the LNG (liquefied natural gas) terminal business.

In terms of market cap, GDFZY is about one sixth the size of EONGY. Looking at the fundamentals, GDFZY's price/sales and price/book ratios are also under 1.0, and it has a trailing price/earnings ratio of about 25. It has an operating margin of just over 10 percent, and a return on equity of close to four percent. Its present book value is $32.81. GDFZY pays a semi-annual dividend (around April and around September) which, in the past has varied widely. For the past twelve months it has paid a total dividend of about $1.92.

RWE AG

RWEOY is another German Utility, providing electricity and gas. It also is involved in exploration for natural gas. It serves the U.K., a limited portion of Northern Europe, central eastern, and southeastern Europe. RWEOY has a market cap of about $22 billion, placing it somewhere between EONGY and GDFZY.

Fundamentally, RWEOY has a price/sales ratio below 1.0; however, it is selling for more than its current book value of $31.22. Both its operating margin (12.7 percent) and return on equity (10.2 percent) are higher than either of the two companies discussed previously. RWEOY pays an annual dividend in April of each year. Over the past five years the dividend has varied from a low of $1.90 (2013) to a high of $4.29.

Saneamento Basico

Located in Brazil, SBS provides water and sewerage services along with waste management. It is a different animal from the prior three utilities, but a "utility" nonetheless.

SBS has been a very profitable company in the past and has recently (in 2013) split twice.With a market cap of just over $9 billion, SBS has a book value of $8.42. Its trailing price/earnings ratio is just over ten. It has an operating margin of 27 percent (highest of the group) and its return on equity is also the highest at 17.2 percent.

Earnings growth is excellent, and expected to continue at a double digit rate for the next five years. Dividend payments are made infrequently, but generally about three times annually. In January of this year it had a 2:1 stock split, followed in early April by a $.39 dividend payment. Then, in late April, SBS split once again - this time 3:1.

Summary

The Protected Principal Retirement Strategy portfolio is presently devoid of utility stocks, mostly because the majority are presently fairly priced (in my opinion). It is my intention to focus on these four candidates, watch for pullbacks, and possibly initiate positions in one or two of them.

At present, I am more drawn to EONGY and SBS than the other two, but this could change.

Source: Protected Principal Retirement Strategy: Foreign Utilities

Additional disclosure: This article does not constitute either a buy or sell recommendation for any of the stocks mentioned.