In this day and age, dividend investors looking for high-dividend stocks shouldn’t limit themselves to U.S. companies only. Some of the best dividend stocks over time have been foreign issuers. And that’s still the case at the moment.
Admittedly, overseas dividend stocks can be more complex. Exchange rate fluctuations affect the actual dividends received by U.S. investors. A European company might raise its dividend for the year — but a U.S. investor might receive less cash if the stronger dollar offsets the higher payout. Many non-U.S. companies only pay dividends twice a year (or in some cases once). Tax considerations need to be kept in mind as well, as many countries apply withholding tax to dividends (albeit usually at a reduced rate).
That said, there are opportunities that are worth the trouble. That’s particularly true amid struggles at what historically were some of the best dividend stocks in the U.S. Companies like Procter & Gamble (NYSE:PG) and Coca-Cola (NYSE:KO) are posting limited growth in their earnings and their dividends. General Electric (NYSE:GE) already has cut its dividend and may do so again under new management.
For investors interested in high dividend stocks, these six overseas issues should at least be considered. All provide strong yields, safe payouts and the potential for growing dividends over time. In other words, they’re exactly what dividend stock investors should be looking for.
Anheuser Busch InBev (BUD)
Dividend Yield: 4.8%
Anheuser Busch InBev NV (NYSE:BUD) — perhaps surprisingly — may be the most dangerous stock on this list. BUD stock held up reasonably well amid the onslaught of craft beer competition — until about two years ago. The stock has fallen about 35% from 2016 highs, however, and at the moment trades at a five-year low.
There is a “falling knife” problem in the near term, but also an intriguing case to at least nibble at the bottom. BUD stock now yields 4.8%. A forward P/E multiple of 17.5x isn’t exactly cheap, particularly with sales growth negative this year. But this remains one of the world’s most well-known consumer companies — and smaller alcohol plays like Diageo (NYSE:DEO) and Constellation Brands (NYSE:STZ, NYSE:STZ.B) actually have performed well. A-B hasn’t entered the cannabis space yet but seems likely to at least dip its toe in at some point.
Again, BUD stock isn’t without risk. But no stocks with an impressive yield are. For investors who see the potential for a turnaround, BUD stock will pay you to wait.
BP (BP) and Royal Dutch Shell (RDS.A, RDS.B)
BP Dividend Yield: 5.2%
Royal Dutch Shell Dividend: 5.4%
Integrated oil & gas stocks like BP (NYSE:BP) and Royal Dutch Shell (NYSE:RDS.A, NYSE:RDS.B) have rallied from 2016 lows — but there’s still more room for upside. I argued after Q4 earnings earlier this year that BP looked like the best play in large-cap O&G — and I still think that’s the case. RDS.A shares do provide a higher yield, but BP raised its dividend this year as it finally puts the Deepwater Horizon disaster behind it.
There’s a nice case for RDS, too, however. The stock looks cheaper on an earnings basis. With Exxon Mobil (NYSE:XOM) rallying back into the mid-$80s, it’s now the cheapest of the majors — and thus may have the most room to run if sector strength continues.
Obviously, an investor needs to believe in at least stable oil prices and continuing gasoline demand to buy either stock. But for those who are bullish on energy and looking for income, BP and the RDS.A shares look like the two best options.
Dividend Yield: 5.3%
Pharmaceutical companies haven’t exactly been safe stocks this decade, and the UK’s GlaxoSmithKline (NYSE:GSK) hasn’t been immune. GSK touched a seven-year low late last year — but it has since rallied about 16%.
Chris Lau argued in July that GSK was more than just an income play — and I’m inclined to agree with him. But that income is attractive, with a yield above 5%. Dividend amounts are uneven, which may turn off some investors (though GSK does pay quarterly). But a 5%-plus yield, a 13.6x forward P/E multiple and growth prospects in the consumer business more than make up for it.
Unilever (UL, UN)
Dividend Yield: 3.3%
While American consumer stocks have struggled, Unilever (NYSE:UL, NYSE:UN) has hung in rather nicely. And there’s a case to buy UL — particularly for investors who still like the consumer space long-term.
The company plans to simplify its corporate structure, moving from two classes of stock (UL and UN) to one. It’s outcompeting rivals like Kraft Heinz (NASDAQ:KHC) — who bid to take Unilever over last year — and General Mills (NYSE:GIS). Valuation is attractive at less than 20x forward EPS — a discount to PG and KO, among others — and the dividend yields a healthy 3.3%.
Personally, I’m still not sold on the consumer space. But for those who see a comeback on the way, or who are looking for more defensive stocks to protect against a market downturn, UL and UN look like attractive plays.
Dividend Yield: 3.8%
UK chemicals manufacturer LyondellBasell (NYSE:LYB) looks like not just the best dividend stock, but the perfect dividend stock. Dividend growth has been steady and consistent, including an 11% hike this year. LZB yields a clean 3.8%, doesn’t have tax withholding due to its UK domicile and trades at a seemingly dirt-cheap 9x forward earnings.
Now, the story isn’t quite as perfect as the numbers suggest. JPMorgan Chase (NYSE:JPM) actually downgraded LYB last month on fears of rising costs, particularly for ethane. Further commodity prices could pressure earnings. More broadly, chemical producers like LYB have a good deal of cyclicality — and there’s the potential for market conditions to become less favorable over the next few years. There’s a reason LYB has traded mostly sideways the last four years despite growing earnings and a higher dividend.
Still, there’s an argument that even the risks are priced in at a single-digit P/E multiple. And the current price still represents nearly a 4% yield on a leading chemical business, with the stock trading near support that’s held around $100. For income investors, that seems like a pretty good deal.
As of this writing, Vince Martin has no positions in any securities mentioned.