A couple of weeks ago, I told you about the enormous number of high-yielding stocks abroad. I think the amount of international dividend-payers out there is one of the market's biggest secrets.
I told you that only 17 profitable U.S. companies were paying yields of more than 12%... compared with 210 abroad. The numbers fluctuate day to day, but the trend is pretty clear.
I've researched this topic for years and the fact is, foreign companies are simply paying higher yields across the board.
In the table to the right you can see the difference between what we get from U.S. companies and what's available from international companies. Keep in mind that I only looked at the common stocks of companies that were profitable during the past year.
Truth is, the stocks in the S&P 500 pay an average yield of just 2.0%, making the United States one of the lowest-yielding markets in the world.
But go abroad, and you find something completely different. No, not every country is a dividend stalwart... but there are a surprising number of markets that more than double the yields found here in the United States.
Compare our 2.0% average yield with what I'm seeing in international markets.
According to Bloomberg, Germany's average yield is 3.6%... Brazil's average yield is 3.6%... the United Kingdom yields the same... Australia yields 4.7%... New Zealand pays 4.8%.
Take a look:
But there are more reasons to look abroad than just the dividend yields.
You see, there's a correlation between economic growth and rising stock prices. The faster the growth, typically the higher the stock market moves.
So it shouldn't surprise you that in 2011 the S&P 500 returned about 2% (that's with dividends included!). When you look at the total performance worldwide, the U.S. market ranked just 13th in the world during that period. In other words, there were a dozen other places to make more money.
But that's just one year. The difference is more pronounced over the long term.
During the past five years ended 2011, the S&P 500 returned -1.2%. But 44 other countries delivered better stock market returns. According to Bloomberg, countries such as Chile, Germany and even Mexico have handily outperformed the U.S. market.
So not only can you find higher yields abroad, but you can also see stronger capital gains.
Look, the United States is unlike any other nation on the planet. It's the largest economy and home to the world's most innovative entrepreneurs. But the simple fact is that the headiest days of our economic growth are behind us.
Why?
It's simply the law of large numbers. With an economy in excess of $14 trillion, growing more than a few percent each year is a major undertaking.
In fact, think back about what we've seen in the past few years. The U.S. government has spent trillions in an effort to stimulate the economy. The Federal Reserve has spent trillions more. Interest rates have been slashed to zero.
And yet, the U.S. economy grew just 2.8% in 2011. Not bad, but nowhere near the top of the list when it comes to gross domestic product growth (GDP).
Qatar topped the list with 17.0% growth. Panama saw a 7.4% rise in GDP... South Korea, 4.5%... Singapore, 5.2%... Poland, 3.8%... even Chile boosted its GDP at a 5.9% annual rate.
The fact is, more and more income investors are realizing that if they want to give themselves the best chance at the "Holy Grail" of investing -- high yields AND rising stock prices -- then they need to look at international companies.
Risks to Consider: Don't get me wrong -- investing in international dividend-payers isn't a guaranteed winning investment. Nothing ever is.
Action to Take-- > But as I like to say, limiting yourself to only U.S. stocks is like going to a restaurant and limiting your options to just one side of the menu. Sure you can find something you like... but wouldn't you rather see all the options?
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