7 International Income Stocks

Cash accounts and CDs yields are measured with a microscope. Long-term bonds have higher returns, but lock in low yields. Investors looking for good yields that can outpace, or at least keep up with inflation should consider stocks for at least part of their income solution.

With a weak dollar, dividend-paying companies located outside the U.S. add the potential bonus -- and risk -- of currency gains to the earnings and dividend stream.

The Motley Fool's CAPS Screener cranked out a number of candidate stocks using the following criteria for the screen.

  • Current yield over 2%.
  • Price-to-Earnings ratio positive and less than 17.
  • Long-term debt to equity ratio less than 1.
  • Market Capitalization of over $2 billion.
  • Finally, a CAPS rating or four or five stars (out of five) to focus on companies our Foolish community believes are the best prospects.

The screen returned a total of 131 names with 45 headquartered outside the United States. The seven stocks below were picked to create a list of stocks from several industries and diversified around the globe.

Company

Currency

Current Dividend Yield %

P/E (TTM)

CAPS Rating 
(out of 5)

Industry

Vale
(NYSE: VALE  )
Brazilian Real

2.2%

10.5

****

Metals & Mining
Unilever
(NYSE: UL  )
British Pound

3.5%

16.7

*****

Food & Beverage
Banco Santande
(NYSE: STD  )
Euro

8.3%

9.7

****

Banking
Sanofi-Aventis
(NYSE: SNY  )
Euro

2.8%

13.9

*****

Drugs
Guangshen Railway
(NYSE: GSH  )
Chinese Yuan

2.6%

12.4

*****

Transportation
ChinaMobile
(NYSE: CHL  )
Hong Kong Dollar

3.5%

10.4

****

Telecommunications
Taiwan Semiconductor Manufacturing
(NYSE: TSM  )
Taiwan Dollar

3%

11.2

*****

Electronics

Source: Motley Fool screener results and Yahoo! Finance. TTM = trailing 12 months.

Even though this list looks like a nice dividend portfolio, the results should be considered ideas for further research, not outright buy recommendations. U.S. investors' research on international stocks should include tax consequences, particularly if stock is going to be held in an IRA account.

By design, the seven stocks cover a number of industries and countries, but they have one common trait -- earnings aren't scored in U.S. dollars. Easy monetary policy from the Federal Reserve is likely to continue the pressure on the greenback. Of course, if the end of QE2 reverses the U.S. dollar's dive to devaluation, the currency tailwinds these companies are enjoying will quickly turn to headwinds.

Related Foolishness:

Fool contributor Russ Krull has no financial position in any of the companies mentioned in this article. China Mobile, Guangshen Railway, and Unilever are Motley Fool Global Gains selections. Unilever is a Motley Fool Income Investor pick. The Fool owns shares of China Mobile. 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.


Read/Post Comments (12) | Recommend This Article (9)

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 April 29, 2011, at 7:58 AM, lemoneater wrote:

    Wow, Banco Santande has a really high dividend yield and low P/E. Perhaps my decision to give banks a miss was a little hasty.

    I guess the real question is what kinds of mortgages does STD issue? Not robo-signed would be a plus. It is sad when business ethics have been so bad in the US that one wonders if an foreign company would have more likelihood of honest practices.

    (I have UL and TSM so it was neat to see they made the article).

  • Report this Comment On April 29, 2011, at 2:13 PM, yamsicash wrote:

    If I remember STD is based out of Spain, which is where the sovereign debt crisis is still being played out. That's why it's yield is so high. Not say it isn't a good opportunity, just that there is a significant risk involved.

  • Report this Comment On April 29, 2011, at 3:51 PM, lemoneater wrote:

    Risk at home and risk abroad. I'm glad to have others on CAPS help me keep informed.

  • Report this Comment On April 29, 2011, at 4:14 PM, rd80 wrote:

    Hmm, we lost the 'r' in Santander somewhere.

    Yes, Banco Santander is based in Spain and no doubt the sovereign debt issues are putting pressure on the price.

    That said, it is one of the strongest banks in the world and generates more than half its revenue from outside of Spain with significant operations in Latin America, the UK and even some in the US.

    This is a little dated, but still largely valid:

    http://www.fool.com/investing/general/2010/12/06/banco-santa...

    No position in STD.

  • Report this Comment On May 02, 2011, at 10:17 AM, lemoneater wrote:

    :) It's all Spanish to me. I'll add the "r."

    It sounds like it's crucial to be aware of where companies make their revenue not just the country they're based in.

    Have a good week!

  • Report this Comment On May 02, 2011, at 4:01 PM, fightingfinn wrote:

    What are the consequences of having STD in a Roth IRA? The author brought up consequences and never elaborated.

  • Report this Comment On May 02, 2011, at 10:11 PM, rd80 wrote:

    The issue with holding a foreign stock in an IRA is that some countries withhold taxes on the dividend income. In a taxable account, you can claim the foreign tax withheld as a foreign tax credit. But in a tax-advantaged account like an IRA, there's no way, or at least no easy way, to get credit for the foreign taxes paid.

    I'm not a tax professional, so don't take the above as definitive. But, I do recommend looking in to foreign tax withholding before deciding to hold an ADR in an IRA account.

    I believe Spain is one of the countries that withholds taxes on dividends.

  • Report this Comment On May 03, 2011, at 8:52 AM, fightingfinn wrote:

    rd80,

    Thanks for the insight! I purchased a position in STD for my Roth this year and have been curious as to why the dividend yield is listed so differently from website to website. I had assumed it had to do with the way the company paid out different amounts in diffenent quarters.

    Does anyone have a link to a reference source regarding foreign taxation on ADR dividends?

    Thanks again.

  • Report this Comment On May 03, 2011, at 11:41 AM, LittleBluestem wrote:

    Spain withholds 19% on dividends for ADRs. Currency exchange rates are a factor as well. Not sure why you are seeing different dividend yields on different sites, but Morningstar's 5-year history for STD's dividend payout shows a pretty significant range over that period. I suppose the return could still outweigh the disadvantages of not being able to recover that tax in an IRA though. YMMV.

  • Report this Comment On May 03, 2011, at 1:03 PM, fightingfinn wrote:

    Thanks for the info! I love the fact you can pick up as much information from the members of the Fool as you can get from access to the articles. Everyday I find a new reason to love this site!

  • Report this Comment On May 04, 2011, at 1:51 PM, LittleBluestem wrote:

    fightingfinn,

    I was looking a little more at STD as a matter of personal curiosity. They just recently ended their 4thQ. It seems they historically pay a significantly higher dividend after their 4thQ each year, on the order of double each of the other quarters, which is then payable during 1Q. That's according to the data I see in Google Finance. That may be throwing off the reported annual dividend yield on some web sites. STD actually paid about $0.67 per share total for the most recent 4 quarters, a yield of about 5.4% at today's stock price BEFORE that 19% foreign tax. Also, one analyst apparently downgraded STD today.

    Hope this helps.

    Paul

  • Report this Comment On May 04, 2011, at 2:09 PM, LittleBluestem wrote:

    *correction: sorry, I have the quarters mixed up a bit. STD's Q1 earnings release was April 28th; Their ex-dividend date for their recent higher dividend ($0.27 versus $0.12 to $0.14 for the previous three quarters) was April 27th.

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