Seeking Higher Dividend Income? Venture Overseas | American Funds

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By the Numbers

January 16, 2017

Seeking Higher Dividend Income? Venture Overseas

There are six times as many companies paying dividend yields higher than 3% outside the U.S. than there are within our borders.

720 — Number of non-U.S. stocks that pay a dividend yield higher than 3%

In a low-rate world, the search for yield has led many investors to focus on U.S. companies that are reliable dividend payers. It could be time to cast a wider net.

Americans have typically stayed within their own borders when searching for dividend yield, but there are compelling reasons for us to begin expanding our investment horizons.

As many as 720 foreign companies pay dividend yields of 3% or higher. That’s six times the number of U.S. companies that meet the same criteria.

If that’s not enough reason to look overseas, consider this: Stock valuations for some dividend payers outside the U.S. have been looking relatively inexpensive compared with their American peers.

“The U.S. equity market has done better than a lot of other markets over the last five to six years, so the valuations of dividend-paying companies in other places are looking more attractive in certain cases,” reports American Funds portfolio manager Joyce Gordon.

Of the 720 non-U.S. companies offering dividend yields above 3%, 418 are in developed countries, while the rest are in emerging markets. In developed international markets, dividend yields have historically played a significant role in driving return for equity investors — accounting for more than half of average annual total returns since 2001.

What types of companies outside the U.S. are paying big dividend yields? It’s a broad range, including British financial services firm Barclays, Chinese telecom China Mobile and Canadian pipeline operator Enbridge.

Keep in mind, searching for dividend yield internationally can pose risks, exposing investors to currency shifts and potential economic instability. Many of today’s higher dividend payers are based in economically sensitive regions.

The bottom line: It’s a big world out there when it comes to high-yield dividend payers. For those investors willing to make the move, it might be time to look abroad.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries.