Money Magazine: Consider Foreign Dividend Stocks

Monday, 27 Jan 2014 07:44 AM

By Dan Weil

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Traditional high-yielding stocks — utilities, telecommunications and real estate investment trusts — fell when interest rates rose last year.

So what's a dividend stock investor to do? Money Magazine recommends looking overseas at foreign dividend stocks.

It notes that European stocks carry valuations that are 25 percent cheaper than their U.S. counterparts and that European shares' yields are higher.

Editor’s Note:
These 38 Dates Are Key to Bagging $313,038

For instance, the Vanguard FTSE Europe exchange-traded fund (ETF) yields 2.8 percent, compared with only 1.8 percent for the Vanguard S&P 500 ETF.

Emerging market stocks yield even more. Jeff Layman, chief investment officer at BKD Wealth Advisors, recommends the WisdomTree Emerging Markets Equity Income ETF, with a yield of 4.1 percent, Money notes.

For those who want to invest domestically, Josh Peters, editor of Morningstar DividendInvestor, suggests investors seek stocks with better-than-average yields and strong dividend growth.

Stocks with a low to moderate payout ratio — the portion of a company's earnings allocated to the dividend — have the capability to boost their dividends.

Among Peters' favorite stocks are Chevron, with a 3.2 percent yield; Clorox, with a 3 percent yield; Intel, with a 3.6 percent yield; McDonald's, with a 3.3 percent yield; and Unilever with a 3.4 percent yield.

Bill Staton of Staton Financial Advisors in Charlotte, N.C., also likes stocks that regularly raise their dividend, such as Boeing, Johnson & Johnson and Pfizer.

"A good rule of thumb is to look for companies that have paid a higher cash dividend for a minimum of 10 consecutive years," he tells CNBC.

"If a company keeps its dividend flat or, worse, cuts it, I tell clients to immediately sell the stock."

Editor’s Note: These 38 Dates Are Key to Bagging $313,038

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