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Recently, I showed that Telefonica (TEF) offers a better value than AT&T (T) or Verizon (VZ). The readers’ interest was quite high, and I have received several valuable comments. One of the readers asked for a specific advice on high-dividend foreign stocks. While suggesting a specific stock as a great buy is not my style, I believe in simple, do-it-yourself type of rules. Therefore, I looked for high dividend stocks with low payout ratios that are also trading with low valuations. Specifically, I set the screening rules as such:

1) The company is headquartered outside the U.S. The majority of these companies operate within several countries. Some of them operate locally. The local companies tend to be in the telecommunication sector.

2) A yield that is higher than 5%. Income investors tend to be more risk-averse compared to other players in the market. Therefore, if we are taking risk, it should be worth it.

3) I set the trailing Price/Earnings ratio to a maximum of 15. The maximum forward P/E ratio is set as 10. This way, not only earnings are big enough to support the yield, but the dividends have room for growth.

4) Minimum market cap is set to be $1 billion. While it is okay with me to invest in small-cap stocks, many investors prefer large-cap stocks.

After setting the parameters as such, I came up with 24 stocks. Here is a list of 24 low P/E but high-dividend stocks that are worth to consider for income oriented investors:

Company

Sector

Country

P/E

P/B

Yield

Total SA (TOT)

Energy

France

7.29

1.34

6.22%

Eni SpA (E)

Energy

Italy

9.55

1.1

6.51%

YPF S.A. (YPF)

Energy

Argentina

10.16

2.8

9.83%

Banco Santander (STD)

Financial

Spain

5.95

0.63

10.98%

Westpac Bank (WBK)

Financial

Australia

9.54

1.54

7.48%

Banco Bilbao (BBVA)

Financial

Spain

7.38

0.81

6.94%

Bank of Montreal (BMO)

Financial

Canada

10.79

1.29

5.13%

Credit Suisse (CS)

Financial

Switzerland

9.18

0.82

5.97%

Banco Macro (BMA)

Financial

Argentina

4.74

1.17

10.11%

BBVA Banco Fr. (BFR)

Financial

Argentina

4.5

1.21

20.75%

Sanofi (SNY)

Healthcare

France

14.99

1.36

5.13%

AstraZeneca(AZN)

Healthcare

UK

6.34

2.56

5.85%

CTC Media (CTCM)

Services

Russia

9.95

2

9.12%

Textainer Group (TGH)

Services

Bermuda

7.53

2.01

5.30%

Vodafone (VOD)

Telecom

UK

12.63

1.05

5.40%

Telefonica (TEF)

Telecom

Spain

5.12

1.16

11.51%

France Telecom (FTE)

Telecom

France

10.85

1.18

11.61%

Mobile Tele (MBT)

Telecom

Russia

12.21

4.5

6.97%

VimpelCom (VIP)

Telecom

Netherlands

10.03

1.1

7.65%

SK Telecom (SKM)

Telecom

South Korea

7.14

1.53

5.39%

Portugal Telecom (PT)

Telecom

Portugal

11.45

1.4

14.57%

Telecom Argentina (TEO)

Telecom

Argentina

6.62

2.26

8.37%

Cellcom Israel (CEL)

Telecom

Israel

5.71

21.19

17.44%

Partner Com. (PTNR)

Telecom

Israel

5.71

6.93

12.90%

Telecommunication Companies

Traditionally, telecommunication companies have been among the best dividend payers in the U.S. Foreign telecom companies are no exception. Consumers have mostly inelastic demand for the services provided by their service providers. We also observe either a monopoly or an oligopoly type of market when it comes to telecommunication industry. Even if the number of competitors might be large in some countries, there is usually a price-leader which fixes the prices, and others follow. So, I think these companies will keep paying great dividends as long as they keep making profits. Among the international telecommunication companies, my favorite ones are Telefonica (TEF) and Portugal Telecom (PT), both of which offer double-digit dividends. Both companies were among the losers of 2011, which partially explains the double-digit yields.

Surely, it is risky to invest in companies that are headquartered in Spain and Portugal. However, what many investors are not aware of is that both companies have significant presence in emerging markets. While the markets in their home countries are pretty saturated, the growth in Latin America and Brazil will be the driving force for future growth. Both Telefonica and Portugal Telecom also own significant stakes at several local companies operating in other countries.

Energy Companies

Three International energy giants made it into the list above. Total (TOT) is the French equivalent of Exxon Mobile (XOM) with double dividends. The stock offers a yield of 6.22% with a payout ratio that is slightly above 50%. Eni SpA (E) is the national oil company of Italy. The company operates in Europe, Africa, Asia, Oceania, as well as the Americas. After reaching its bottom between August and October, Eni bounced back, gaining near 30% in the last 2 months. However, it is still a good deal with a yield of 6.5%.

YPF Sociedad Anonima (YPF) is an Argentina-headquartered energy company. The stock supports a yield of 9.83%. YPF has been a loser so far in 2011, but analysts have double-digit EPS growth estimations from the company. The prospects for the Argentinean economy are high. I think the company will also benefit from the country’s growth prospects.

Financial Stocks

Financials have been the worst performing stocks of 2011. The performance of emerging markets and Europe has also been horrible. That is probably the primary reason why ex-U.S. financials seemingly offer great yields. Some of those high-dividend stocks lost near 50% of their market cap in this year. I would not buy the financials (particularly banking stocks) for their high-yield. Given the extreme worries and possible liquidity problems, these banks should have done a better job for their investors by adding this dividend into their capital base. Even retaining them as past earnings could have helped to relax the markets by showing their commitment to a stronger balance sheet.

Nevertheless, after making significant losses, I do not think there is much downside left among these stocks. They could be good speculative plays to profit from a strong global recovery. These stocks can also serve the purpose of diversification and investment in other currencies.

Healthcare

AstraZeneca (AZN) and Sanofi (SNY) are the two low-priced healthcare companies that can afford dividends above 5%. Both companies look very cheap with forward P/E ratios of 7.57, and 8.82. I think AstraZeneca and Sanofi offer a great deal, particularly when compared to their U.S. counterparts. Based on pretty conservative EPS growth estimates of 5.9%, and 3.7%, AstraZeneca and Sanofi have the following fair-value ranges:

FAIR - VALUE

AZN

SNY

Lower Boundary

$67.56

$32.17

Upper Boundary

$85.55

$58.33

Minimum Potential

46.17%

-9.44%

Maximum Potential

85.10%

64.19%

Service Companies

CTC Media (CTCM) is a multimedia broadcasting company headquartered in Moscow. The stock lost near 60% in this year, which partially explains the yield of 9.12%. Although the stock is cheap with trailing P/E ratio of 9.95 and forward P/E ratio of 8.77, investing in Russia has its own geo-political risks. The company looks great on the balance sheet with 0 debts. It is also one of the BRIC stocks that are undervalued by leveraged free cash flow.

Textainer Group (TGH) is engaged in the marine cargo container business. Founded in 1979, the company is a subsidiary of Halco Holdings. The company is highly profitable with a net profit margin of 50%. Tanker companies tend to have a high debt/equity ratio, and Textainer is no exception. Invest at your own risk.

Source: Top International Dividend Stocks for Strong Income