In the summer of 2009, it was easy to find solid international
companies yielding 10% or higher. During the vicious
bear market
and global
recession
of 2007-2009, even high-quality companies were caught up in the
general
market
malaise and saw their share prices fall sharply.
Historically, income stocks get hit hard when companies announce a
cut to their dividends. But back in 2008 and 2009, investors even
regarded companies with a long track record of raising their
payouts with a jaundiced eye. Companies that maintained or grew
their payout amid the worst economic downturn of the post-war era
saw their stocks tumble 50% or more as investors sold everything to
raise cash. In some cases, there was a valid rationale for
investors' skepticism, while in others it was simply a case of pure
panic among the investment public -- investors adopted a sell first
and think later approach.
As any investor who lived through the collapse of late 2008 and
early 2009 can tell you, that was a scary environment. But the
fear-driven sell-off also presented myriad opportunities for
investors who could maintain a cooler head and patiently buy
quality companies from within the maelstrom.
Case in point:
Teekay LNG Partners (NYSE:
TGP
)
, which is a member of one of my
High-Yield International
portfolios, offered a
yield
of 24.2% at its lows in October 2008, despite the fact that the
energy-shipping
partnership
actually announced a
dividend
hike in late 2008 and has never cut its payout since
going public
in 2006.
In addition, all of Teekay LNG's carriers were leased out to major
oil companies such as
Exxon Mobil (NYSE:
XOM
)
under long-term contracts at fixed day-rates. Cash-rich Big Oil
companies never experienced a funding crunch even as credit markets
soured, as most had plenty of cash on hand to fund ongoing business
needs.
Fast-forward to today, and it's a lot harder to find quality stocks
yielding more than 10% in the current environment. While stocks
have hardly enjoyed an uninterrupted rally since the 2009 lows, and
the economic recovery is far from robust, the mindless panic that
gripped global markets in late 2008 has dissipated. Investors have
become far more rational again and differentiate between quality
companies that can maintain their payouts and those that can't.
While some shakier companies may
offer
10% or even 15% yields, those payouts are the market's way of
compensating investors for above-average risk of a dividend cut.
But just because finding companies
offering
double-digit yields has become harder, it doesn'tmean it's
impossible. And the recent sharp downturn in stock markets has
pushed some quality dividend-paying stocks down enough that they're
now offering double-digit payout potential.
I found several foreign stocks trading on the major U.S. exchanges
with an average trading
volume
of at least 2,500
shares
per day that are worth a look. These are companies that have
produced positive dividend growth in the past five years, and
almost all of them have positive returns so far in 2012.
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Risks to Consider:
Now remember, these dividend yields are so high for a reason.
Share prices have been punished, and the market has priced in the
possibility of a dividend cut. With that said, the fact that these
companies have raised dividends during the past five years should
be seen as a positive.
Action to Take -->
All of the stocks in the table above are worthy of further
research. If one of them looks to be unfairly punished and that
high yield screams opportunity, then don't let it pass.
Navios Maritime Partners, with a yield of 13.3%, is already in one
of my
High-Yield International
portfolios. The stock is unfairly beaten down by the fact that it's
headquartered in Greece. But it's technically organized in the
Marshall Islands, pays no Greek corporate taxes and earns its
revenue from leasing dry bulk ships in U.S. dollars. If there's
ever a misunderstood stock that's beaten down, offering smart
investors a chance to lock in a large
dividend yield
, Navios may be it.
-- Paul Tracy
Paul Tracy does not personally hold positions in any securities
mentioned in this article. StreetAuthority LLC owns shares of XOM
in one or more if its "real money" portfolios.