By John Wasik
CHICAGO, June 1 Finding consistent total stock
returns has always been a challenge. But even as the euro zone
beast continues to flair its nostrils and U.S. employment
wheezes, there are stocks that are worthy contenders,
particularly ones that pay dividends. While they don't eliminate
market risk, dividends can bolster total return in skittish
equity markets. And some of the best sectors for high-dividend
players are far from Wall Street.
For long-term investing, think commodities, energy,
utilities and non-banking financial services. Banking is still
touchy, but insurance is a safer bet.
Established, brand-name stocks often pay large dividends,
but that doesn't mean they should dominate your portfolio. The
Admiral Group, a U.K.-based auto insurance company, for
example, is hardly in a league with the oil producer Royal Dutch
Shell in terms of name recognition. Yet the insurer is
the top holding in the SPDR S&P International Dividend ETF
, paying a 5.38 percent dividend yield as of June 1.
Shell, by the way, is no slouch in the dividend department
either, paying 5.53 percent as of the same date. Europe's
largest oil producer reported that its earnings were up 11
percent in the first quarter.
The international dividend strategy is often rooted in
sectors in which profits are consistent and growing. That
translates into steady dividend growth year after year, although
the sectors that are favored for stock-price appreciation will
Let's say you were long in commodities, which isn't a bad
play considering the demand for raw materials from developing
countries. Then you'd want a company like BHP Billiton Ltd.
), one of the world's largest natural resources
companies. BHP mines aluminum, copper, coal, iron ore, nickel,
silver and uranium and also has oil and gas reserves.
Another growth sector is telecommunications, particularly in
emerging economies. China Mobile, the largest
cellphone carrier in the People's Republic, has more than 600
million subscribers - and is growing. That's roughly twice the
population of the U.S. already.
A key part of the global dividend strategy is to stay in
sectors that are likely to continue dividend growth. That's why
exchange-traded funds make the most sense when investing in
these companies. The funds can hold broad indexes of dividend
payers so you don't have to guess which companies will maintain
or raise their payouts. ETFs also blunt risk, since unusually
high dividends can be a sign of a company's financial distress.
To find dividend players in emerging markets, I suggest the
WisdomTree Emerging Markets Equity Income fund, which
gives you exposure to China, Brazil, Taiwan and Turkey. Fund
managers look at all sizes of companies and base their
selections on an index of companies that have paid at least $5
million in dividends over the past year. An alternative is the
SPDR S&P Emerging Markets Dividend ETF.
If you prefer a focus on more developed markets, then
consider the iShares Dow Jones International Dividend Index ETF
. The fund invests in companies among the top 100
dividend payers that have had payouts in the previous three
years. A similar fund is the PowerShares International Dividend
Many, if not most, of these funds, it should be noted, were
touted last year as part of a growing group of "low-volatility"
stock funds. While I think that has been a misnomer because it
implies that these vehicles won't be hit by general market
declines - they certainly will - they deserve a place in your
When selecting a global dividend-stock fund, keep in mind
that they won't insulate you from market risk and they are not
These funds can be volatile and will be impacted if more
European countries slip into recession, the U.S. falters or the
Eurozone banking crisis isn't resolved. They also are subject to
sector risk. If they are over concentrated in say, energy, and
that sector is sold off in a market correction, then you will
see declines in share prices. Buy them to augment your current
stock positions and to boost income, but they shouldn't be core