Right now, many quality European multinationals are cheaper than
their U.S. peers, as investors' concerns about Europe'seconomy have
lowered share prices.
The S&P 500 currently trades at 2.14 timesbook value and
12.4 times projected 2013earnings , compared with 1.5 times book
and 10.8 times estimated earnings for the Euro Stoxx 50Index , an
index for Eurozoneblue chips .
The EuroStoxx 50 also yields more than 4.5% -- double the
S&P 500's 2.25%.
Yet even with all the negative headlines about Europe, I've had
great success with several Europeanstocks in my
, a French pharmaceutical company that's up nearly 90% in the few
short years I've owned it. Or U.K-based
National Grid (
, an electric distribution utility that has been paying a
steadydividend since I added it in 2008 and is up 27% in two
And now, I've pinpointed another European company worth
considering for your portfolio that pays a solid 5%dividend yield .
Not to mention, it sells one of the most recognizable brands in the
I am talking about
, maker of Mercedes Benz.
Daimler's wide geographic exposure is its biggest competitive
advantage when it comes to minimizing risk. The firm can rely on
sales gains in the United States andemerging markets to help offset
downside shocks such as those caused by therecession in the
European Union (
In 2012, Daimler was hit by a perfect storm. Problems in Europe,
combined with poor profitability of the Mercedes brand in China
during the past couple of years, led to a sell-off inshares .
The good news?
This has made thestock cheap compared with many other companies
But that's only part of the story. Here's the really exciting
China (now the world's largest carmarket ) and other emerging
markets continue to show solid growth. Chinese car sales were up
roughly 10% in the third quarter compared with one year ago.
And while Daimler reported only moderate growth during the
summer months, Chinese economic indicators have improved markedly
since mid-summer. Recent Chinese manufacturing surveys also suggest
auto demand should accelerate again into 2013.
The macroeconomic outlook for other emerging markets, including
India and Russia, also continues to look solid.
Daimler is also expected to refresh 70% of its product portfolio
between 2011 and 2015. In 2013, two of its most anticipated product
launches include a new S-Class and a facelift for the E-Class
slated for the second quarter. The S-Class, in particular, is a
top-selling premium-priced model. China has been the world's
largest market for the car, so the new model should aid growth in
So while it's tough to see much growth potential in Western
Europe in 2013, and U.S. automobile sales remain far lower than
their pre-crisis peaks, I'm not too concerned. Saleswill pick up in
both regions, just as they will continue to grow in China and the
rest of the emerging world.
Simplyput , Mercedes is an aspirational brand. It's a status
symbol -- a sign that you've "made it."
And right now, China is churning out tens of thousands of newly
rich consumers every year. (In fact, it was recently reported that
China now has more than 1 million millionaires.)
You can bet that, at some point, all of these newly wealthy
consumers will think about buying a Mercedes.
[Note: You may have noticed that Daimler trades over-the-counter
(OTC). That shouldn't worry you in the least. As I said, this is
one of the most recognized brands in the world. But you should
consult yourbroker if you have questions about trading OTC shares
of international companies.]
Daimler pays dividends annually in April. The payment was $2.92
per share in 2012 (after thecurrency conversion), up from $2.45 the
year before. (Germany withholds 26.4% of dividends paid to U.S.
residents, though investors can reclaim this tax as a credit
against their U.S.tax liability usingIRS Form 1116. Also, no
withholding tax is collected on shares held in anIRA .)
Action to Take -->
Based on 2012's payout, the stock yields about 5%, and there's
potential for modestupside to the payout in 2013. But make no
mistake... it's the emerging-market growth element that has me
excited about picking up shares of Daimler while they're cheap. I
think Daimler is a buy below $60 a share.