The 30 Best U.S. Traded International Dividend Stocks

In a previous article, I provided a list with the best dividend stocks for the long run. Since the list included only US stocks several readers asked for a similar list with international dividend growth stocks instead. Furthermore, I am also looking to expand my portfolio to include at least some allocation to global dividend companies.

I do agree that in the globalized society of the 21st century it is important do be able to diversify your stock investments away from the US. By purchasing international stocks one essentially receives income in a different currency, which is a decent hedge against a possible devaluation of the US dollar. Another benefit of shopping for quality dividend stocks abroad is the huge potential for economic growth and development that both established and emerging economies posses.

There are some differences between US and international based dividend stocks. The first is that the dividend payments of foreign dividend stocks closely follow the earnings trend for the corporation. This is a problem for international dividend growth investors as it does not lead to a consistently increasing dividend income stream, which they are used to by investing in US companies. In the US companies are reluctant to cut dividends if the company had a bad year, while in Europe the dividends are more likely to be cut in response to short term fluctuations in earnings.

Another difference with global dividend stocks is that most pay dividends on an annual or semi-annual basis, which decreases the compounding effect of your payments. In addition to that, a certain percentage of your foreign dividends could be withheld directly from your payment, which decreases your income and makes individual dividend investing in a tax-deferred account inefficient. For example dividends paid from Canadian Companies to US investors are subject to a 15% withholding tax. The IRS however does give a tax credit for the current 15% Canadian withholding tax for foreign investors.Different countries might have different taxation treaties for taxing dividends, thus you might consider hiring a good tax advisor.

Speaking of accounting matters, most foreign companies do not report results using the US GAAP but using IFRS. This could create material differences when analyzing foreign stocks, as there could be distortions in the amounts of net income, balance sheet values and cash flows.

In addition to that, most US based corporations have operations on a global scale, which derive a large portion of their revenues from abroad. I found that the ten stocks with the highest weights in the S&P 500 index derive about 44% of their aggregate financial contributions from foreign operations then the overall contribution to financial performance would be similar for the index as a whole.

Thus an investor, who is simply invested in an S&P 500 index fund, is also properly diversified internationally. Adding any further international stocks could increase my international exposure, without adding any further incremental benefits.

I focused my study only on international stocks trading on the US exchanges. This does provide some limitations to the pool of available investments, but the risks to opening a non-US brokerage account in a foreign currency, paying taxes to foreign governments and paying higher brokerage fees for trades are not worth the incremental rewards for individual investors.

The companies I selected were foreign-based corporations, which have increased their dividends for at least five consecutive years. I tried creating a diversified list of foreign stocks, in order to avoid putting all my eggs in one basket. I also tried to select companies with reasonable dividend payouts, sustainable business models and companies showing earnings over the past year.

The companies that made the cut include:

Consumer Discretionary

• (SJR) Shaw Communications Inc. (Cl B)
• (TRI) Thomson Reuters Corporation

Consumer Staples

• (BTI) British American Tobacco PLC (ADS)
• (CBY) Cadbury PLC ADR
• (DEO) Diageo (analysis)
• (UN)/(UL) Unilever PLC/Unilever N.V.

Energy

• (BP) BP PLC (ADS) (analysis)
• (ENB) Enbridge Inc.
• (TK) Teekay Corp.
• (TNP) Tsakos Energy Navigation Ltd.
• (TRP) TransCanada Corp.

Financials

• (BMO) Bank of Montreal
• (BNS) Bank of Nova Scotia
• (CM) Canadian Imperial Bank of Commerce
• (MFC) Manulife Financial Corp.
• (PRE) PartnerRe Ltd.
• (TD) Toronto-Dominion Bank (analysis)

Health Care

• (ACL) Alcon Inc.
• (AZN) AstraZeneca PLC (ADS)
• (FMS) Fresenius Medical Care AG & Co. KGaA (ADS)
• (NVO) Novo Nordisk A/S (ADS)

Industrials

• (MITSY) Mitsui & Co. Ltd. (ADS)

Materials

• (BHP) BHP Billiton Ltd. (ADS)
• (SQM) Sociedad Quimica y Minera de Chile S.A. (ADS)

Telecommunication Services

• (NTT) Nippon Telegraph & Telephone Corp. (ADS)
• (TEF) Telefonica S.A. (ADS)
• (TU) TELUS Corp.
• (VOD) Vodafone Group PLC (ADS)

Utilities

• (NGG) National Grid PLC (ADS)
• (VE) Veolia Environnement (ADS)

The portfolio is not a recommendation to buy or sell any stocks, as it reflects my specific financial risk tolerance. Always do your own research before initiating a position in any financial instrument.

Full Disclosure: Long BP and TD. I am looking to enter other stocks mentioned here on dips

Comments

[kata:]

dont forget CEO, chinese oil.

Jun 15 12:53 AM

[367113:]

I think TEF. is a very good stock. If it gets to $ 56. i'll buy.

Jun 15 02:10 PM

[Danny Furman:]

Agreed on the premise and many of the picks, however Brazil utility ADRs CPL & SBS are among my largest holdings for the same reasons discussed. They have continued to grow profits through the start of 09 and both pay high dividends. Utilities in growing urban regions, like telecom mentioned in the article, are fundamentally the among the most sound investment vehicles out there. Low PEGs and P/Es, low if any debt and best of all, relative to everything else out there, low prices.

Jun 15 02:53 PM

[heball:]

You missed one of my favorites a play on Exxon and Dutch Royal Shell in Germany with nil in debts, North European Oil Royalty Trust (NRT). You don't mind a little whipsaw action and fluctuating divs, they pay 11.7%

Jun 18 05:44 PM

[Canuck Econ...:]

Good list; if I were in the US, I would put some of my eggs in foreign baskets; in foreign markets "close to home" in the sense that the countries have to have equal or greater safety to US investments. I believe US investments are likely to move sideways relative to foreign equivalent investments which will hold their value quite well but which are likely to appreciate a lot once the flight for safety of US currency is over and foreigners take a second look at the huge imbalances that still exist in US financial accounts (large current deficit; larger fiscal deficit - US continues to live beyond its means).

Jun 26 09:58 PM