Three of the Best Dividend Investments in the World
by Carl Delfeld, Investment U Senior Analyst
Thursday, June 30, 2011: Issue #1546
When I was with a Wall Street firm, it was common for stockbrokers to mock investors who focused on income.
Traditionally, income meant bonds... And in the old days many bonds came with coupons, which investors clipped and then cashed... And nothing was worse than being labeled a "coupon clipper." But today, bond investors do have it even worse.
- One-year Treasuries yield nearly 0.19% right now.
- Meanwhile, inflation just hit 3.6%, according to the latest estimates from the Bureau of Labor Statistics.
That means you're actually losing purchasing power by "collecting income" from one-year Treasuries right now.
So if you're looking to add to your income portfolio, what's an investor to do?
Outperforming Bonds and More Stable Than High-Growth Stocks
In a word: dividends.
Dividend-paying stocks are not only outperforming in terms of bonds... They tend to be more stable than high-growth stocks. And in uncertain times like these, that's an important consideration.
The question is: Where can you find the best dividends in the world today?
For the answer, you need to look overseas... Here's what I mean...
Going Global for Strong Dividend Yields
Companies overseas offer a great opportunity to bolster your dividend portfolio.
Take Asia, for example.
In 2010, companies in the MSCI Asia-Pacific Index paid out almost as many dividends as those listed in the S&P 500.
And according to Matthews Funds, from 2002 to 2009, Asian companies grew dividends at a compound annual growth rate of 18%, compared to 10% for the S&P 500. Japan, China, Australia, Taiwan and Hong Kong are the biggest dividend payers in the region.
Europe also offers some strong opportunities:
- France Telecom (NYSE: FTE) offers an 8.9% dividend yield.
- British American Tobacco (AMEX: BTI) has a 4.2% dividend yield and a 17% annual dividend growth rate over the past five years.
All of these are worth considering.
But my favorite dividend investments right now aren't stocks. They're exchange-traded funds (ETFs).
These investment vehicles offer instant diversification, low costs, strong profits tied to emerging market growth, and still provide yields that crush bonds.
My Three Favorite Global Dividend ETF Investments
Here are my three favorite dividend ETFs right now...
- DIVIDEND ETF #1: The brand new Global X SuperDividend ETF (NYSE: SDIV) tracks the performance of 100 equally weighted dividend companies from around the world. SDIV provides good diversification with exposure to REITs (22%), consumer discretionary stocks (16%), telecommunications (16%), financial services (10%), utilities (8%), banking (5%), consumer staples (5%), energy (5%), industrials (5%), insurance (3%), technology (3%), and health care (2%).Nearly 32% of the companies in the basket are U.S.-based, 24% in Australia, 10% in Great Britain, 6% in Canada and 4% in Singapore, among others. In addition, the fund currently pays out 4.08% annually.
- DIVIDEND ETF #2: Second, consider one of my long-time favorite ETFs, the PowerShares International Dividend Achievers Portfolio (NYSE: PID). To become a part of this exclusive basket, companies must have a record of increasing their dividends for five consecutive years. The United Kingdom and Canada comprise 50% of its holdings. U.S. companies make up a mere 6%. The fund has risen steadily up 8.16% over the last 12 months and is currently returning an annual yield of 2.81%.
- DIVIDEND ETF #3: Finally, if you'd like more Asia and emerging-market exposure, purchase WisdomTree's Emerging Market Equity Income ETF (NYSE: DEM). DEM has 20% exposure to Taiwan and 20% to Brazil. Telecom companies make up a majority of the companies in the basket. You can expect it to distribute dividend income in the area of 5% annually.
With this global triple play, your stock portfolio will get a welcome shot of income - and global diversification.