Investors looking for income should consider foreign stocks. Most U.S. dividend stocks have seen strong gains and the sector looks picked over, with yields getting pushed lower as investors bid up the stock prices. The average dividend stock in the S&P 500 Index trades at a higher price to earnings multiple when compared to its foreign counterpart, and it also offers a lower yield. While many foreign stocks are yielding over 4%, the broad S&P 500 Index yields just about 2%.
Foreign dividend stocks not only offer a better valuation and higher yields, they might also fare better if President Obama's 2013 budget is implemented. If that budget passes, taxes could nearly triple on dividend payments and that could cause U.S. investors to sell dividend stocks. Since most foreign stocks are owned by non-U.S. investors, the impact of any dividend stock correction due to tax law changes in this country are not likely to create a major hit to
foreign dividend stocks. Since some of the best values in the markets are based in Europe and outside the U.S., it makes sense to take a closer look at some global giants with generous dividend yields:
Novartis (NYSE:NVS) is based in Switzerland, and it develops and manufactures vaccines, prescription drugs, over the counter and other products. This company has been challenged by patent expirations. In particular, a blockbuster drug for hypertension, called Diovan will lose patent protection in the United States in September, 2012. The company also recently announced that it would layoff almost 2,000 employees since it expects revenues to decline. These headlines have kept some investors away from Novartis shares, but that might be an opportunity to buy cheap. The stock trades for just about 10 times earnings, and the dividend yield will pay investors to wait for higher prices with a yield of nearly 3%. Novartis exports all over the world, so it will benefit if the Euro currency weakens in the coming years.
Here are some key points for NVS:
Current share price: $55.55
The 52 week range is $51.60 to $64.82
Earnings estimates for 2012: $5.35 per share
Earnings estimates for 2013: $5.53 per share
Annual dividend: about $1.60 per share which yields about 2.9%
Sanofi-Aventis (NYSE:SNY) is a Paris, France based pharmaceutical and vaccine company. It has developed a number of blockbuster drugs such as Ambien, and Plavix. Sanofi exports many products globally so it will benefit from a weaker Euro.
Warren Buffett has been a buyer of Sanofi-Aventis shares and his Berkshire Hathaway (BRK-B) holding company owns millions of shares in Sanofi-Aventis. With a price to earnings ratio of just about 10, the investment backing of Warren Buffett and a generous yield of around 4.5%, there is plenty to like about this stock.
Here are some key points for SNY:
Current share price: $38.92
The 52 week range is $30.98 to $40.75
Earnings estimates for 2012: $4.01 per share
Earnings estimates for 2013: $4.30 per share
Annual dividend: about $1.76 per share which yields about 4.5%
Siemens AG (SI) is considered by some investors to be the General Electric (NYSE:GE) of Europe. This broadly diversified company is a leader in electronics, healthcare, automation and engineering. This German company is also involved in finance, telecommunications, real estate and other industries. Compare this stock to General Electric and you can see the value it offers now. GE is expected to earn about $1.54 in 2012, and it trades for over $20 per share. That puts the price to earnings ratio at about 14 while Siemens is just about 11.5. Based on that comparison, Siemens appears to be about 35% cheaper than GE. Since Siemens sells its products all over the world, it will not be completely reliant on the strength of the Euro-zone and it will benefit from a weaker Euro currency. This stock has been rising lately, but it is worth buying on dips.
Here are some key points for SI:
Current share price: $103.95
The 52 week range is $84.86 to $146.74
Earnings estimates for 2012: $8.92 per share
Earnings estimates for 2013: $9.64 per share
Annual dividend: about $2.85 per share which yields 2.7%
Telefonica SA (NYSE:TEF) is a Spain-based communications company whose services include voice, data, Internet, etc. Spain has very high unemployment levels and a weak economy, however, Telefonica has operations in Latin America which is a much stronger region
economically. Since mobile phones and communications through the Internet are likely to see future growth even in recession-weary countries like Spain, now is a great time to buy low. The very high yield this stock offers will pay investors very well, while they wait for a higher stock price. However, "Mad Money" host Jim Cramer thinks the dividend is not safe, and that might be true, so it doesn't make sense to take a large position in this stock.
Here are some key points for TEF:
Current share price: $17.19
The 52 week range is $16.18 to $27.31
Earnings estimates for 2012: $1.79 per share
Earnings estimates for 2013: $2.22 per share
Annual dividend: $1.69 per share which yields about 10%
Unilever NV (NYSE:UN) is a leading maker of consumer food products and it owns brand names such as Ben & Jerry's, Knorr, Hellmans, Wish Bone, Amora, Ragu, Bertolli, Vaseline, Suave, Slim Fast, Dove, and others. These types of food and snack products will most likely remain relatively strong, even in a weak economy. Unilever is based in Europe but since it sells all over the world, the impact of a weakening European economy might not hit the company too hard. It could even benefit if the Euro currency declines because it exports most of its products overseas. The stock appears to have strong support at around $30 per share, so buying on dips at that level is likely to reward long-term investors.
Here are some key points for UN:
Current share price: $32.79
The 52 week range is $29.42 to $34.55
Earnings estimates for 2012: $2.12 per share
Earnings estimates for 2013: $2.33 per share
Annual dividend: about $1.19 per share which yields about 3.6%
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I am long TEF, SI.