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Dividend stocks can be a useful method of augmenting income while bond yields are under pressure. They do not replace bonds as they have much higher volatility and it is important to consider diversification. To that end, I noted a selection by Alex Dumortier of the Motley Fool, who looks at International Dividend stocks.

His selection has four European and one Brazilian stock. With the debt worries in the Eurozone having a downward pressure on stocks, this may seem like a risky move. However, it may be possible to find stocks that will continue perform well -- especially if they have worldwide exposure.

Alex's selections are shares you can buy directly on the NYSE and that pay a yield well in excess of that on the S&P 500.

  • Sanofi (NYSE:SNY) France / Pharmaceuticals 4.7%
  • CRH (NYSE:CRH) Ireland / Construction Materials 4.8%
  • ABB (NYSE:ABB) Switzerland / Heavy Electrical Equipment 3.4%
  • Companhia Siderurgica Nacional (NYSE:SID) Brazil / Steel 8.4%
  • Credit Suisse (NYSE:CS) Switzerland /Diversified Capital Markets 3.1%

Source: S&P Capital IQ, author's calculations.

These are major companies that are in different markets. There is no reason that they shouldn't have international markets -- I would think that CRH is the one that is most likely to serve more local customers. This is an interesting selection and worthy of comparison with our broadly diversified dividend bearing ETF portfolio. It will be interesting to see how they compare with our reference dividend bearing ETF portfolio.

AssetFund in this portfolio
REAL ESTATE(NYSEARCA:ICF) iShares Cohen & Steers Realty Majors
CASHCASH
FIXED INCOME(NYSEARCA:TIP) iShares Barclays TIPS Bond
Emerging Market(NYSEARCA:VWO) Vanguard Emerging Markets Stock ETF
US EQUITY(NYSEARCA:DVY) iShares Dow Jones Select Dividend Index
US EQUITY(NYSEARCA:VIG) Vanguard Dividend Appreciation ETF
INTERNATIONAL EQUITY(NYSEARCA:IDV) iShares Dow Jones Intl Select Div Idx
High Yield Bond(NYSEARCA:HYG) iShares iBoxx $ High Yield Corporate Bd
INTERNATIONAL BONDS(NYSEARCA:EMB) iShares JPMorgan USD Emerg Markets Bond

Portfolio Performance Comparison

Portfolio/Fund NameYTD
Return
1Yr AR1Yr Sharpe3Yr AR3Yr Sharpe5Yr AR5Yr Sharpe
Retirement Income ETFs Tactical Asset Allocation Moderate1%-2%-25%10%81%7%55%
Retirement Income ETFs Strategic Asset Allocation Moderate5%-1%-11%13%107%2%8%
5 Top International Dividend Stocks1%-25%-67%-0%-1%

I am not really surprised that the returns are poor over the time frame that the selection has existed as a portfolio. I am going to split out the individual stocks to see if there are some strong performers in the group.

Portfolio Performance Comparison

Portfolio/Fund NameYTD
Return
1Yr AR1Yr Sharpe3Yr AR3Yr Sharpe5Yr AR5Yr Sharpe
ABB13%40%156%-2%-5%18%39%
SID-29%-39%-79%-22%-30%
CRH-17%13%30%-53%-27%-40%-6%
SNY18%1%42%12%34%-0%-8%
CS-8%-19%-68%-10%-15%-7%-14%

As I look at the individual performers, the only ones I would take is ABB and SNY. These are worldwide brands and they have the best returns.

Five Year Chart

We can see the cyclical nature of ABB's business, and none of the other stocks provide a counter balance against it.

Five Year Chart

Then we can see how the more diversified portfolios reduce the volatility and is a better overall solution.

I don't see any merit in this selection -- some of the names are OK but these aren't stocks that are going to be in my list as I think they will still be significantly impacted by the Eurozone crisis, and the Brazilian steel manufacturer doesn't stand out either. I am sure there are better international stocks that these.

Disclaimer: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

Source: 5 Top International Dividend Stocks According To The Fool