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5 Dividends for the International Investor

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After "How big is the yield?" the second question you should ask as an income investor is "How safe is the yield?" Whether you rely on the distributions to pay the bills or reinvest them to boost your returns, you want to know that your investments will continue to pay for years to come. This is why you should look for companies protected by wide economic moats with low payout ratios. These two factors will go a long way toward helping you build a rock-solid dividend portfolio, but I suggest you also look for high yielders with significant international exposure.

Why go global?
From a dividend perspective, the biggest advantage of looking for companies with international exposure is that global diversity helps the company generate the consistent cash flows necessary to maintain -- and ideally increase -- its dividend. For example, look at Philip Morris International (NYSE: PM  ) , which pays a 3.9% dividend. In the most recent quarter, total cigarette shipment volumes in the European Union dropped 3.5% year over year while shipments in Latin America declined 1.1%. However, shipment volumes increased 12.6% in Asia and 5.1% in Eastern Europe, the Middle East, and Africa, leading to a total shipment volume increase of 4.5%. This translated to a 26.4% increase in revenue -- or 15.9% excluding currency -- while net earnings increased 30.5%.

Another advantage of global companies is the potential for growth in emerging markets. Consider Yum! Brands (NYSE: YUM  ) , which pays a dividend of 1.9%. While I wouldn't expect to see stellar growth from its flagship brands -- Taco Bell, Pizza Hut, and KFC -- here in the U.S., it's a different story overseas. The company has opened more than 4,000 locations in China and hopes to eventually increase that number to 20,000. Meanwhile, Yum Restaurants International, which handles the company's locations outside of the U.S. and China, opened 193 new locations during the third quarter of 2011 and expected to have opened 900 new locations during the course of the year.

Time to break out the passport
Philip Morris and Yum! Brands both hold positions in my portfolio, but I'm always on the lookout for dividend-paying stocks with similar international exposure. Here are three such stocks from my watchlist.

Vodafone (NYSE: VOD  ) , which pays a dividend of 3.5%, not counting a special dividend, is the world's largest mobile phone operator. While investors may associate the company primarily with Europe, its reach actually spans the globe. Thanks to this, the company can offer stability like that of Philip Morris in addition to impressive growth from emerging markets such as Turkey, India, and Africa.

If you're looking to add a tech dividend to your portfolio, Intel's (Nasdaq: INTC  ) 3.3% yield probably isn't a bad choice. From the domestic standpoint, the company isn't all that exciting. The PC market has matured, leading to less-than-inspiring sales. Moreover, the company faces increasing competition from ARM Holdings. However, I think the billions of dollars Intel spends on research and development will help the company maintain its market dominance. As for growth, it still has plenty of opportunities in emerging markets and even if those markets wind up skipping over PCs in favor of mobile devices, the company can benefit from the infrastructure build-out required to support those devices.

For those of you looking for a good sin stock, but who have qualms about investing in tobacco, there's global booze maker Diageo (NYSE: DEO  ) . The company pays 3.4% and boasts an impressive portfolio of well-known beer and liquor brands including Smirnoff, Guinness, and Captain Morgan. Its distribution network spans 180 countries. The team over at Motley Fool Income Investor thinks the stock is a little pricey at the moment, so I'd keep this one on your watchlist for now and wait for a more attractive price.

Foolish takeaway
These are just a handful of the opportunities awaiting investors willing to take a more global view. If you'd like to learn about two more stocks prepared to profit in emerging markets and read more about Yum! Brands, then check out this special report "3 American Companies Set to Dominate the World." It's absolutely free, so click here to download it today.

The Motley Fool owns shares of Diageo, Yum! Brands, Philip Morris International, and Intel. The Fool has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Yum! Brands, Philip Morris International, Diageo, Vodafone Group, and Intel. Motley Fool newsletter services have recommended creating a bull call spread position in Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Fool contributor Patrick Martin owns shares of Philip Morris International and Yum! Brands. You can follow him on twitter @TMFpcmart03. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (14) | Recommend This Article (38)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 12, 2012, at 4:49 PM, DividendsBoom wrote:

    Vod has a much higher div yield. You are simply doubling the interim div. Add the interim and final and you get a much higher yield

  • Report this Comment On January 12, 2012, at 6:09 PM, kyith wrote:

    i thought the yield for Vodafone is higher at 5% and if include prospective Verizon wireless distribution 7%

  • Report this Comment On January 12, 2012, at 6:59 PM, TMFDarwood11 wrote:

    Sorry, can't buy PM. The company sells what some people call "cancer sticks." I could make money off of this, but is it moral to make money from the misfortune of others? It's a personal decision.

    Of course, if one gets really serious, we can't buy MCD either!

  • Report this Comment On January 12, 2012, at 7:26 PM, mohamedziauddin wrote:






  • Report this Comment On January 12, 2012, at 8:02 PM, cva10 wrote:

    I have known people who smoked and lived to be 95. What about the car makers? Over 20,000 thousand people dead each year in auto accidents

    Do we stop buying cars?

  • Report this Comment On January 12, 2012, at 10:10 PM, etihwttam wrote:

    I don't think it's fair for this article to omit discussion of foreign withholding tax. I owned shares of AUY and 10% of the divi. was withheld for Canadian taxes (that is, it was withheld and I never got it back). Far as I know, the UK does not withhold any of the divi. so VOD should be a safe bet. David Kou (sp?) on the UK podcast regularly speaks highly of VOD.

  • Report this Comment On January 12, 2012, at 10:53 PM, dbtheonly wrote:


    First off, you make the money in Canada, you pay the taxes in Canada. What's unfair?

    I'm no expert, but aren't taxes paid to a foreign country deductions to your US taxes? I seem to remember a Turbo tax question on the issue.

  • Report this Comment On January 13, 2012, at 12:18 AM, Edeskimo wrote:

    if you're an American and hold Canadian company shares in your retirement savings account then there is no dividend withholding taxes applied.

    As others have suggested, if held in non-registered accounts you can apply for a foreign tax credit on your income taxes paid on the dividend.

  • Report this Comment On January 13, 2012, at 12:29 AM, WillisSr wrote:

    As a Canadian owner of various US stocks I know the experience.

    Always that withholding of 15% tax from dividends.

    Even from some ADRs.

    So do not blame Canadians from withholding their fair share.

  • Report this Comment On January 13, 2012, at 1:08 PM, dmawhinney wrote:

    My take on etihwttam's comment is NOT that the tax is unfair, but unless you can take the foreign withholding as a tax credit (instead of a Sched A deduction) you don't get the published yield.

  • Report this Comment On January 15, 2012, at 2:00 AM, mikecart1 wrote:

    Investors with morals aren't truly investors at all. I find it funny how people continue to call PM and MO bad but have no problem owning a bank that scams money from thousands of customers off lousy interest payments that ultimately lead to some not having money to put food on the table. Or how about those car stocks like F or GM? Those machines we use daily have slowly destroyed this planet from the need to drill for oil for fuel to the toxins these pollute into the air. Or how about any fast food stock that produce obesity causing products that raise health care for all and increase the risks of heart disease and diabetes?

    Morals? I have none! I am consistent. :o]

  • Report this Comment On January 19, 2012, at 8:22 PM, kayakmastr wrote:

    What about individual accountability? It is the user and buyer who makes the critical choice, not the provider and seller. No user and buyer, no provider and seller. Why do so many think that someone (God or the Government?) should only allow them the opportunity to make good and correct decisions and make mistakes impossible?

  • Report this Comment On January 21, 2012, at 4:03 PM, NebularNovice wrote:

    The discussion of Canadian withholding illustrates the case that stocks which have foreign withholding should not be held in tax-deferred accounts (IRA, 401k, etc.) because you don't have the opportunity to fully recover the amount withheld through the foreign tax credit. (You do effectively get the deduction, but the credit is far more valuable.)

    A slight generalization would apply the same reasoning to mutual funds which pass these withholdings through.

  • Report this Comment On January 26, 2012, at 2:07 PM, MrBambrick wrote:

    This is a great article about Diageo of Latin America

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