by Lawrence Meyers | February 24, 2014 1:19 pm
Let’s face it: International stocks are scary things.
Few U.S. investors have lived overseas. Problem is, people live differently in other countries, so it’s more difficult to assess how consumer behavior operates in a culture that’s different from our own. That’s why I usually stick to funds that carry international dividend stocks and just let the pros pick for me.
Generally speaking, dividend stocks say something about the underlying company: namely, that it is on firm enough financial footing to give back to shareholders. But that’s all it tells you … and again brings us back to our initial issue.
The key then, to international stocks, is finding areas of the markets that you can find enough information about, and preferably businesses you actually understand. For instance, here are a few international dividend stocks that I’m comfortable with owning:
Dividend Yield: Variable
When I ask my friends in the international investment community what the next three big countries are for investment and growth, they are unanimous: Costa Rica, Colombia and Brazil.
The GDP of Brazil represents about 4% of the world’s GDP. The trend for GDP is heading modestly upward at the moment after soaring up through 2008. I think this growth is going to return. The unemployment rate just dropped to a record low in December to 4.3%.
But setting aside GDP, Brazil’s telecommunications infrastructure was privatized in the 1990s and it was a mess. Investment in the sector continues to pour in. Mobile penetration is strong at 132% but service is spotty. All this means is growth until Brazil catches up with the rest of the world.
Telefonica Brasil (VIV) is one of the big four plays in Brazil, and VIV stock has more cash than debt and is significantly FCF positive.
The yield is a sticky wicket, if only because the company pays them so inconsistently. However, based on 2013’s total payouts, the stock current yields north of 8%. Even if you’re conservatively estimating to get half that yield this year, you’re still in good shape.
Dividend Yield: 7.85%
Barclays (BCS) is a hugely diversified financial services company, and that gives me comfort since it doesn’t just operate in one space or just in the U.K. Barclays also operates in Europe and Africa, offering both retail and commercial banking.
Of course, BCS offers the famous Barclaycard, but it’s also an investment bank and has a wealth management group. Barclays offers mortgages, unsecured loans, insurance, international payment services, and all the strategic and risk management services a global bank would be expected to offer.
I love preferred shares of financials, because if the underlying ever runs into trouble, the preferred has more rights and only gets its dividend cut after the common does. Barclays Preferred D Shares currently yield 7.85% and trade about 3% above par at $25.85. The ticker will vary depending on the brokerage or financial search engine you’re using.
Dividend Yield: 5.9%
Finally, we have a company many oil service enthusiasts may know well, Ensco (ESV).
Ensco is one of the premier oil drillers in the world, with its fleet of rigs, drill ships and submersibles. Based in the U.K., ESV chugs along year after year. The company improved its dividend by more than 60% from 2011 to 2013, and it now offers a nice, juicy 5.9% yield.
As dividend stocks go, ESV stock should remain a winner. The world will always need oil, as I always say, and drillers will always be the most popular stocks on the block. ESV itself is expected to grow earnings by roughly 14% annually for the next five years, and revenue growth for 2014 is forecast to come in the high single digits.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at firstname.lastname@example.org and follow his tweets @ichabodscranium.
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