International exposure is an important part of a well-rounded stock portfolio, but it can be tricky to evaluate and select foreign companies to invest in. However, through Canadian-based Toronto-Dominion Bank (NYSE:TD) and well-known insurer Aflac (NYSE:AFL), you could get lots of great geographic diversification without venturing outside your comfort zone.
In this clip from Industry Focus: Financials, analyst Michael Douglass and Fool.com contributor Matthew Frankel discuss the two companies.
A full transcript follows the video.
This video was recorded on May 14, 2018.
Michael Douglass: We've talked a lot about international investing. Time to talk through some companies with significant international exposure. First one, Matt, one of your favorites and one that, we joked before the episode, you always look for an opportunity to bring up, TD Bank.
Matt Frankel: It's just a great bank stock. Ignore the international exposure, it's still a great bank stock. TD, if you're not familiar, Toronto Dominion Bank is the official name. If you live on the East Coast, you've probably seen a TD Bank branch, but they're not throughout the United States yet, which is one of the big reasons I like the stock.
TD Bank is one of the biggest banks in Canada. It's the sixth-biggest bank in North America. They're based in Canada -- which brings up, out of the five stocks we're going to talk about, this is the only one that's not based in the U.S. Currency headwinds are more of a factor here. Specifically, I get paid dividends in Canadian dollars from TD Bank. So, as the Canadian dollar has weakened, it looks like my dividend is going down, but that's really not the case.
Anyway. TD Bank has a lot of room to grow in the United States, has a very nice revenue division between Canada and the U.S. They have some growth catalysts. Like I said, they're only in pretty much the East Coast right now, and they've done a great job of growing both organically and through acquisitions. They recently acquired Target's credit card portfolio, just to name a couple. Scottrade is the other one I was going to bring up. They just really have a long avenue for growth for such a big bank.
Douglass: Yeah. There's a lot of reasons to like TD Bank. And it's the only one on our list that's actually not a U.S.-based company. Let's turn to Aflac.
Frankel: This is one that people in America, especially, are usually surprised to find out is not predominantly an American company. In fact, America is a small portion of Aflac's revenue. They're big in Japan. Aflac is actually the No. 1 health and cancer insurer in Japan. They're a big, big company over there. We know them for their accident insurance, short-term disability insurance, things like that. Aflac, great example of, if you want exposure to another developed market -- Japan, in this case. Aflac is a dividend aristocrat. They've paid dividends for over 30 years in a row. They have a very low payout ratio, really good business fundamentals, and like I said, really great developed market exposure.
Douglass: Yeah. That's one of the things here to really highlight, I think -- Japan being their big market. That turns on its head the thing that we usually tend to see across a lot of, not just financials but a lot of sectors, where the U.S. is the big market, and a lot of others are the second-biggest or the third-biggest.
Frankel: Just to name one other statistic I forgot to mention, one in four Japanese households is an Aflac customer.
Douglass: Wow, talk about market share. That's pretty impressive.