Foreign Investments:

Lock in 18.5% Yields by Investing in Foreign Companies
Smart Profits Issue #500
February 26, 2007

Guest Editorial by the Street Authority

Imagine going to a supermarket and shopping in just half of the aisles, or opening a restaurant menu and limiting your dinner choices to the entrees listed on just one of the pages.

This is essentially what investors with no foreign exposure are doing with their portfolios. 

In years past, most of the world's stock market capitalization was locked up in the United States. However, trillions of dollars in market wealth has been created overseas in the past decade, and there are now actually more opportunities outside our borders than within.

Take banks, for example. In terms of assets, seven of the top ten banks in the world are foreign-based companies. And the story is similar across most other industries, from retailers to steelmakers to electronics manufacturers -- many future industry bellwethers are located outside the U.S.

And aside from a greatly expanded pool of investment ideas, there are several other reasons to consider foreign investments. Most importantly, stock prices are heavily influenced by economic expansion and overall corporate profitability. And as the world's largest economy (with a gross domestic product (GDP) in excess of $13 trillion), it is virtually impossible for the U.S. to deliver the robust growth rates that it has posted in decades past.

Fortunately, many other countries around the world are at far earlier stages on the economic development path and should see much higher growth rates than the United States for years to come.

As you can see from my chart, while the U.S. economy is still dominant, it simply can't match the growth that is taking place in markets like China and India.

Considering the link between economic expansion and equity prices, it's not surprising that U.S. stocks have struggled to keep pace with the rest of the world.

Entire Markets Surging Triple Digits

While the S&P 500 had a lackluster 2007, rising just +3.5%, just look at the
returns posted by other stock markets around the world . . .

U.S. stocks have never moved like this. Never. The highest one-year gain the S&P 500 ever reported was +45% -- and that was a lifetime ago . . .  in 1954.

In 2007, the S&P 500 didn't even crack the top 50, coming in 76th out of the world's 90 major stock-market indexes.

Dividends Play a Leading Role

On top of eye-popping returns, when you venture off the U.S. exchanges you also find freakishly high yields. 

While U.S. shares pay less than 2%, the average stock in New Zealand yields more than 7%! And there are dozens of Kiwi blue chips throwing off 9%, 10%, 11% and more!

Check out my chart and you'll see how much more other markets yield. And I'm not even including a dozen other smaller markets that are also paying more than the U.S.

Poland, for example, yields an average 3.6%. Singapore yields 3.4% . . .  Greece, 3.7% . . . Holland, 3.4% . . . and Taiwan, 4.1%. And remember, those are just the averages. These figures are weighed-down by a large number of stocks that don't yield a cent.

According to Jill Evans, manager of the Alpine Dynamic Dividend Fund (ADVDX), dividend yields on foreign exchanges are currently running about double the meager average payout of roughly 1.8% among S&P 500 firms -- and fatter quarterly paychecks are just the beginning.

Whether it's Brazil, Hong Kong, or Turkey, dividends send the same message in any language. Specifically, recurring dividends represent millions (or even billions) in annual payments to shareholders. And companies that can meet that obligation in both good times and bad can usually be counted on to deliver consistent cash flows.

Furthermore, dividends can also act as a built-in safety net in a falling market. As the price of a stock drops, its yield rises -- thereby attracting investors. This tends to prop up dividend payers in a down market and can even set a floor on the share price.

Simply put: dividend-paying stocks can usually be trusted to deliver above-average long-term returns with less volatility than the broader market. According to renowned professor and market researcher Jeremy Siegel, the top 100 highest-yielding stocks in the S&P 500 have returned +3% more per year on average than the index as a whole.

And if dividends can make that much of a difference in our low-yield domestic environment, imagine what the generous double-digit yields commonly found overseas can do for your portfolio. These are exactly the types of stable, high-yielding foreign companies I introduce my readers to every month in my premium newsletter -- High-Yield International.

It's the only publication of its kind dedicated exclusively to finding high-yielding securities in foreign markets. In it, my mission is to show my subscribers how they can earn steady yields of 8% . . . 10% . . . even 15% or more by investing in these foreign millionaire makers.

In recent issues of High-Yield International, I've profiled several of the most promising markets for dividend-lovers, including Australia, New Zealand, and Canada.  In the process, I profiled several promising high-yielders, including an electric utility with a 9.6% yield, an up-and-coming mining firm with an 11.3% yield, a natural gas monopoly with a 13.0% yield, and a small, undiscovered transportation stock with an 18.5% yield, among many others.

If you'd like to learn the name of these companies -- plus receive a steady stream of foreign stocks, funds and other investing ideas with abnormally high dividend yields each and every month -- then I'd like to extend you a personal invitation to try my premium international investing newsletter . . . High-Yield International. Visit this link to learn more.

Thanks for joining me on my search for today's highest-yielding securities!

-- Nick Lanyi
Editor
High-Yield International
 

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