Exchange-traded funds, or ETFs, offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some international dividend stocks to your portfolio but don't have the time or expertise to hand-pick a few, the PowerShares International Dividend Achievers (NYSEMKT:PID) could save you a lot of trouble. Instead of trying to figure out which stocks will perform best, you can use this exchange-traded fund to invest in lots of international dividend stocks simultaneously -- ones that have hiked their payouts each of the last 10 years.
It's a smart idea to diversify your holdings not only by market size and industry, but also geographically. If the U.S. economy stalls or slides, other economies may still be performing well and could help offset losses in your portfolio. International dividend stocks offer an extra bonus, as dividends can be quite powerful wealth-builders. (Internationally reaped ones can be a little more complicated than domestic ones, though.)
The ETF's basics
ETFs often sport lower expense ratios than their mutual fund cousins. This ETF sports an expense ratio -- an annual fee -- of 0.56%. The ETF has outperformed its benchmark handily over the past three and five years.
On your own you might not have selected Teekay LNG Partners L.P. (NYSE:TGP) or Navios Maritime Partners L.P. (NYSE:NMM) as international dividend stocks for your portfolio, but this ETF includes them among its 66-some holdings.
A closer look at Teekay LNG Partners
Teekay LNG Partners, a master limited partnership, specializes in shipping liquefied natural gas, or LNG, liquefied petroleum gas, or LPG, and crude oil worldwide. It's one of the world's largest independent owners of LNG tankers, too. That's good, because upheaval in Ukraine has led some to wonder whether that will lead to increased demand for LNG from America, which will drive more business for Teekay. Also boding well is the fact that natural-gas prices have been higher in Europe and Japan than in the U.S. Teekay LNG Partners has already been performing well lately, with first-quarter results featuring distributable cash flow rising 12% year over year.
Bulls like that Teekay favors long-term contracts (think 10 years to 25 years) with big, stable energy companies,and that it sports an order backlog worth nearly $7 billion in income. Long-term contracts make the company less vulnerable to the industry's volatility. It has several new tankers being built, and when finished in a few years, they should be able to take advantage of higher day rates.
Teekay LNG's net income has been growing briskly, but its share count has jumped a bit in recent years, and its free cash flow turned negative recently. The company also sports considerable debt. Its net margins are fat, well into double digits, and the stock yields a hefty 6.3%. With a P/E ratio below its five-year average, it's worth some consideration.
A closer look at Navios Maritime Partners
Navios Maritime Partners, another MLP, specializes in dry bulk shipping of commodities such as iron ore, coal, grains, and fertilizer, and favors fixed-rate contracts. It offers an even fatter dividend yield, of 9.4%.
Navios's first quarter was solid, with revenue rising 14% year over year, net income rising at a similar rate, its operating surplus jumping by 82%, and dividends being maintained at their generous level. The quarter also revealed continued fleet utilization of nearly 100%, though daily earnings fell.
Navios enjoys some long-term contracts for its vessels, but that has a downside, too, as a bunch of large Capesize vessels have been locked in to rates below prevailing spot rates. Navios Maritime offers a lot to like, but bears point out its considerable debt that has been rising in recent years, as well as the possibility of a China credit crisis that could deal a big blow to demand and Navios' profits.
The big picture
It makes sense to consider adding some international dividend stocks to your portfolio. You can do so easily via an ETF. Alternatively, you might simply investigate an ETF focused on international dividend stocks and then cherry-pick from its holdings after doing some research on your own.