"The Dividend Party Is Just Getting Started on Wall Street"
"It's Time to Cash In On Dividends"
"The World's Biggest Companies Pay Out $1 Trillion in
(a new world record)
Those were some headlines I saw on CNBC in the past couple
weeks. That's just a sample, too. Lately, the financial news has
been flooded with experts touting the virtues of owning reliable
Normally, we would recommend you take these "experts" opinions
with a grain of salt. After all, most major media conglomerates
are so politically driven that they usually fail to provide any
actionable investing advice to begin with.
But, that said, we would be lying if we told you we disagreed
about the future of the dividend market. Truth be told, we --
like those experts on CNBC -- firmly believe
will remain some of the market's best performers over the next
#-ad_banner-#Historically speaking, dividend stocks do well
when interest rates are low. That's because low rates tend to
reduce the returns on traditional income investments like bonds,
savings accounts and certificates of deposit. In order to offset
the decrease in investment income, people move their money into
dividend stocks in search of higher returns.
We've seen this trend play out over the past few years...
As you can see from chart, while interest rates (represented
by the 10-year Treasury yield) have fallen, dividend stocks have
And it's unlikely that trend is going to change anytime
Ben Bernanke reaffirmed this theory a few weeks ago, when the
(now former) Federal Reserve chairman told reporters at his
regular FOMC press conference that interest rates could remain at
or near zero through at least mid-2015. He even said that when
the Fed does decide to raise rates, the most it would consider is
a paltry 0.5% to 1.0% increase.
That means the Fed is all but guaranteeing investors will
enjoy a dividend-friendly environment for at least the next
year and a half.
Of course, as with everything in investing, half the battle
when it comes to dividend stocks is finding good deals to begin
with. After all, it's not enough to simply buy those dividend
payers with the highest yields or the lowest payout ratios. Such
one-sided approaches typically end in disaster.
So what's the best way to search for the market's
-- ones that promise to capitalize on the momentum in the
dividend market and provide protection in the event of a
In his March issue of
, Nathan Slaughter looks to the emerging markets.
As Nathan notes, the currency problems in countries like
India, Turkey and Argentina have many investors fleeing from
developing economies around the world.
But, as Nathan claims, this "crisis" should prove nothing more
than a temporary setback...
The problem, as Nathan explains, is the fear of rising
interest rates. See, over the past few years investors have been
borrowing money in the U.S. -- where interest rates have been
historically low -- and investing them in countries that earn
With the Fed's taper starting to take effect, some investors
fear this trade may no longer be profitable...
Yield-hungry investors have spent the past few years
borrowing low-cost dollars and then reinvesting them in
higher-yielding emerging markets overseas. That might mean
putting the proceeds into a dividend-paying stock in South
Africa, a corporate bond in Poland, or sovereign debt in
The strategy yields easy profits -- until something upsets
the delicate balance. You can't net a profit until whatever
currency you're holding is converted back into greenbacks. And
earning a rich yield of 5% or 6% overseas doesn't mean much
when the underlying currency drops 8%.
Once the liquidity spigot that had greased the carry trade
closed, the party that had been in full swing came to an abrupt
end, with participants tripping over themselves to reach the
What we're seeing now is a hangover -- pure and simple. Too
many investors over-imbibed on arbitrage and are now paying the
consequences, wishing they had shown more restraint. Hangovers
are no laughing matter. But I've noticed something: No matter
how painful, they don't last. Most are a distant memory before
He goes on to say emerging economies are expected to grow 5.4%
in 2014 -- more than double the pace of the 2.1% growth expected
in developed countries. Plus, right now these nations have
substantially lower debt-to-GDP ratios than their developed
counterparts, and it's easy to see why Nathan thinks now's the
perfect time to start honing in on high-yield emerging market
Nathan isn't the only StreetAuthority analyst bullish on
emerging markets either. In his February issue of
, Michael Vodicka makes a compelling case for investing in Hong
Hong Kong is the second most business-friendly country. It's
an easy place for foreigners to open a local business, it's
politically stable, and it operates within a strict and
efficient legal environment.
These pro-business policies have transformed Hong Kong into
the most competitive economy in Asia, with an unemployment rate
of just 3.3%. It also makes Hong Kong the third largest
recipient of foreign direct investment (
) in Asia behind only China and Japan, according to the Hong
Kong Trade Development Council.
Hong Kong is coming off a rebound year for its economy. The
country is expected to log 3% GDP growth for full year 2013, up
from 1.5% in 2012. Looking forward into 2014, the International
Monetary Fund (
) forecast another year of 3% or higher GDP growth.
But despite the positive outlook, Hong Kong stocks look
undervalued. The H-Share Index trades at a price-to-earnings
(P/E) ratio of just 7 times earnings, making it the cheapest
benchmark in Asia. Its Hang Seng Index is trading at just 10
times earnings. That is a 33% discount to the S&P 500's
As Michael goes on to explain, those low valuations are
currently presenting investors with a great opportunity to pick
up quality Hong Kong-based dividend stocks at fantastic
Specifically, in his issue, Michael told his subscribers about
one of Hong Kong's largest telecom providers, which is currently
posting a 6.7% dividend yield -- significantly higher than U.S.
telecoms like Verizon (NYSE:
) and AT&T (NYSE:
What's more, Michael thinks additional dividend hikes are also
in this company's future. In the past three years, this telecom
has averaged a 31% dividend growth rate, increasing its dividend
27% in 2011, 47% in 2012 and 18% in 2013. If history is
indicator, 2014 will likely prove another positive year for this
company's income investors.
Yet despite having a convincing growth story and paying a 6.7%
yield, right now this company is trading at a price-to-earnings
(P/E) ratio of 11 -- a sharp discount to the S&P 500's P/E of
15.5. As a result, Michael thinks this stock is a good
conservative play for income investors willing to venture into
the high-yield world of international investing.
[Of course, out of fairness to Michael's readers, I can't give
that high-yielder away. You'll have to
become a High-Yield International subscriber
yourself to take advantage of that opportunity.]
Put simply, if you're looking for the best dividend stocks on
the market right now, you'd be making a big mistake to not look
The truth is, most investors have no idea that
four out of five stocks with dividend yields over 12%
are found outside of the United States.
Most may also be unaware of how strong growth has been abroad,
which helps explain why the typical investment in Michael
portfolio has gained an average of 62%.
Most importantly, many investors don't know that there are
international high-yield stocks traded right on the New York
Stock Exchange. To learn how to get started on your own
high-yield international portfolio -- and to get several free
names and ticker symbols --
be sure and watch this special presentation
© Copyright 2001-2010 StreetAuthority, LLC. All Rights Reserved.