Dividend culture abroad holds hope for higher yield
- Joyce Gordon
- Porfolio counselor
- Based in:
- Los Angeles office
- Investment experience:
JOYCE GORDON: The companies that have moved up quite a bit based on this yield rally that happened — a rally in the yield stocks — include some of the consumer staples and household products companies. Some of them do look very expensive now, and so we’re looking around for alternatives, and we can find them.
I wouldn’t say generally it’s one industry in the U.S.; we find them in different industries. And in places where we can invest outside the U.S., like Capital Income Builder®, we’re finding much more value in European utilities than we’re finding in U.S. utilities: much better dividend yield and much lower multiples on earnings.
The culture in some of these countries — they’re just very strong dividend payers. So they typically do offer a 5, 6, 7% yield, which is very attractive, and the stocks have not been bid up because of the state of the economy there. So it just makes it a lot more compelling.
But when you look at telecoms, you see the opposite. Telecoms in Europe are not that appealing. A lot of them have already cut the dividend. There [are] a lot more competitive pressures in Europe, and the U.S. telecoms look better. We actually have 4%-plus yield on the U.S. telecoms, and the dividends are growing. We’re in a very concentrated market, where there’s a key No. 1 and 2 player and an emerging No. 3 player getting a little bit stronger. But it still has good pricing environment for the companies. And that’s not the case in a lot of places in Europe.
So it really varies, and we really have to understand what’s going on at the country level and the impact on the companies.
- U.S. stocks showing strength
- Divided Europe holds investment opportunities, risks
- Dividend culture abroad holds hope for higher yield
- Rising rates will underscore need for dividend growth
- Emerging markets slump doesn’t derail long-term outlook