Internationaldividend stocks are a great way to
adddiversification to a portfolio, especially since it's easier to
find faster growth outside the United States. Owning foreign stocks
could become even more compelling in 2013, if Congress fails to
avert a fiscal cliff and the U.S.economy plunges back into
arecession next year.
With this in mind, I went looking for lesser-known international
dividend payers that have solid fundamentals andearnings growth
potential. So I ran a screen for non-U.S. companies thatyield at
least 5%, have conservative balance sheets and that are forecast to
grow earnings at least 10% in each of the next five
Here are my top five international stocks thatoffer income and
growth opportunities for U.S. investors:
Seagate Technology (Nasdaq: STX)
makes the hard-disk drives that go into PCs, servers, game
consoles and other electronic devices that require mass
storage. The company is benefiting from the growth of cloud
computing and from its close relationship with device
manufacturer Samsung, which also owns a major stake in the
company. During the fiscal 2013 first quarter that ended in
September, Seagate'searnings per share (
) improved threefold to $1.42 from 32 cents a year earlier.
Analysts say Seagate should be able to grow earnings at a 15%
rate in each of the next five years.
Seagate has a solidbalance sheet , showing $2.4 billion
ofcash versus $2.9 billion oflong-term debt , and an
impressivecash flow of $4.2 billion in the past 12 months.
Dividend payout is modest at only 20%, but the company has
shown a laser-like focus on dividend growth this year -- it
has already raised the dividend twice in 2012. The last
increase was 18% in November to a per-share $1.52 annualized
rate yielding 6%.
Banco Macro SA
While growth in Argentina's economy has slowed a bit in 2012,
many analysts predict a rebound in Latin America's
third-largest economy next year.
Banco Macro (
is Argentina's sixth-largest bank and owns the largest branch
network across Argentina. The bank mainly focuses on small-
to mid-sized business customers outside of the capital city
of Buenos Aires, where there is less competition and
opportunities to gainmarket share quickly.
Banco Marco has been able to expand without the need to
build new branches by acquiring smaller banks that are being
liquidated by Argentina'sCentral Bank . The markets Banco
Marco serves benefit from strong demand for the agricultural
and mining products they produce and export.
Year-over-year earnings per share improved 31% in the
third quarter of 2012 to $1.50 and analysts predict this bank
could deliver at least 12% earnings growth in each of the
next five years. Banco Marco has more cash than debt and an
attractive 27.7%return on equity (ROE) . Trailing 12-month
earnings of $5.39 per share provide more than twofold
coverage of the $2.08 dividend.Shares yield an outstanding
Tal Education Group
Tal Education Group (
provides K-12 after-school tutoring services in the People's
Republic of China through a network of 260 learning centers
across 15 major Chinese cities. The company also owns
, an education platform that serves as a gateway for online
During the first six months of fiscal 2013 ending in
February, Tal Education boosted student enrollments by 28%
and improved earnings by 36.7% to 27 cents a share compared
with a year earlier. Tal Education sees ample room
for further growth, particularly in newer markets where the
company is under-penetrated. Analysts look for Tal Education
to deliver 27% earnings growth in each of the next five
Tal Education also made its first-ever dividend
payment during the second quarter of the year, set at 50
cents per share. The company has no long-term debt and more
than $223 million in cash. It produced cash flow of $73.4
million last year, which more than covers this year's $38.9
million dividend payment.
Diana Containerships (Nasdaq: DCIX)
owns and operates a fleet of container vessels in Greece. The
company was established in 2010 and has grown its fleet
mainly through acquisitions. Diana took delivery of four new
container ships in 2012, which expanded its fleet to 10
vessels. As a result, net income more than doubled
in the first nine months of 2012 to $5.7 million from $2.3
million a year earlier. Currently, all 10 ships are under
contract, with five ships available for new contracts in 2013
and the remainder to become available in 2014 and 2015.
Unlike other Greek shipping companies, Diana has been
careful to avoid an overreliance on debt. The company has a
good balance sheet that shows $64.3 million of cash versus
$91.8 million of debt, and a conservative 37%debt-to-equity
ratio . Diana generated cash flow of $12.5 million last year,
which easily covered $4.2 million of dividend payments. The
company initiated dividend payments last year and has
increased the rate every quarter. It plans to maintain the
current annualized dividend rate of $1.20 per
share for the foreseeable future, according to the
IRSA Inversiones y Representaciones S.A (NYSE:IRS
is Argentina's largestreal estate company. It currently
owns 13 major shopping centers and 11 "AAA"-rated office
buildings, primarily in Buenos Aires. Together, these
holdings represent more than 450,000 square feet of
leasable space. In addition, IRS owns three five-star
hotels, a huge land bank across Argentina and a 30% stake
in Argentina's largestmortgage bank, Banco de la Nación
Duringfiscal year 2012 ended in June, high occupancies
for the shopping center and office portfolio helped to fuel
20.6% growth inEBITDA , which is the most meaningful
earnings metric for real estate companies. IRSA reported
similarly strong results in the first quarter of fiscal
2013 ended in September. EBITDA rose 14.3% to $51.3
million, while earnings improved to $10.5 million from a
$23.1 million loss in the year-ago period.
The company is also strategically pruning its portfolio.
It sold $15 million worth of non-strategic assets last
quarter and agreed to acquire a majority stake in a
downtown Manhattan office building. Consensus analyst
estimatescall for 13% earnings growth in each of the next
five years. IRSA has more equity than debt, and produced a
trailing 12-month EBITDA of $217.2 million that easily
covers $59 million of dividend payments. IRSA's annual
dividend of 76 cents a share yields a nice 10.7%.
Risks to Consider:
All of these stocks pay dividends in their native currencies,
so there is risk for U.S. investors from fluctuating exchange
rates. In addition, many foreign companies pay dividends based on a
percent of earnings, so dividends are cut when earnings weaken.
Also, many foreign countries withholdtaxes on dividends paid to
U.S. investors. Argentina has no withholding tax on dividends but
China and Greece withhold 10% and Ireland withholds 20%.
Action to Take -->
My top pick overall for income investors is Seagate Technology
because of its impressive cash flow, solid balance sheet and firm
commitment to dividend growth. Diana Containerships and Tal
Education are more like true growth stocks and are a bit riskier.
Banco Marco and IRSA are solid income stocks for investors who are
banking on continued growth in Argentina's economy.
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