Having all your eggs in one basket is a risky investment strategy. Sure, you could realize huge gains, but if your sector tanks, you could lose everything.
As an American, the impulse to support US industry is entirely understandable. However, to become a successful dividend investor, you must detach yourself emotionally from your investments. Take a look around you – in 2020, America is unravelling due to poor leadership.
The stock market may be soaring, but at this point, it has nothing to do with the health of the economy. The Federal Reserve has pumped trillions into the market, and everyone assumes they will step in again if needed.
This assumption is incredibly dangerous – the second The Fed changes their policy, the bottom will fall out of the DOW and the S&P 500. As a responsible dividend investor, your goal is to pick stocks that deliver a consistent annual return. To do that these days, we advise looking beyond America’s shores.
In this guide, we’ll discuss markets that offer stable dividend investing opportunities.
If the idea of investing internationally gives you heart palpitations, begin your research in the Great White North. Despite having fewer people than California, Canada has the 10th largest economy in the world. In 2019, our maple syrup-loving cousins put up GDP figures of over 1.7 trillion CAD (1.26 trillion USD).
With that much economic activity, you can be sure there are solid investments up north. Start by looking into the Bank of Montreal (TSX:BMO). This venerable institution have been accepting deposits from Canadians since 1817. While banks are adept at making money, BMO is in a class of its own. Their stock has paid out dividends since 1829 – a streak that dates back 191 years! With a payout ratio of 56%, a dividend of 5.57%, and a stock price near book value, it’s a must for your international portfolio.
When it comes to consistency, it’s tough to beat utilities. North of the border, Fortis (TSX:FTS) is a leading owner of natural gas and electrical infrastructure. They manage assets in Alberta, British Columbia, and Atlantic Canada. Additionally, they also own a handful of utility companies in the Caribbean, Belize, and even here in America. They have one of the longest dividend issuing streaks among utilities, as they have paid investors for 45 years straight. Their dividend percentage stands at 3.55%, and at present, analysts project a 5-year return of 15.7%. Given the uncertainty of the moment, that’s nothing short of remarkable.
Want to continue researching Canadian dividends? Check out these recommendations in Canada for dividend stocks – happy hunting!
While the UK still has a few kinks to work out post-Brexit, they’ve already endured its worst effects. As we speak, they command the 6th largest economy on Earth. In 2019, they boasted a GDP of over 2.2 trillion GBP, or more than 2.8 trillion USD.
While it’s fair to say that Brexit did a number on Britain’s reputation, the country remains a powerful economic force. London is still a significant financial center, and the UK remains strong in value-added sectors like aerospace and pharmaceuticals.
When it comes to standout dividend stocks, though, British Telecom (LON:BT.A) is the poster child for consistent returns. At present, they are on a 21-year issuing streak. Formally known as BT Group, this telecommunications firm operates in over 180 countries. In short, BT Group couldn't diversify itself more if it tried. Boasting 8% annual yields, BT Group pays its investors twice per year. Given their consistency and strong payouts, this stock is a sure bet for conservative investors.
Fear of the unknown means insurance firms will always be in demand. In the United Kingdom, Aviva (LON:AV) is one of the biggest names in the industry. They sell life, home, auto, and health insurance, but they also offer pension plans. In the United Kingdom and abroad, they have over 33 million customers. Aggressive investors take note: Aviva dividend stocks boasted a yield of 8.01% in 2019. Since 2013, its return has grown by roughly 70%. With COVID-19, we expect growth to pause for a year or two. However, when the market establishes a new normal, we expect yields to continue their upward trajectory.
These days, Europe is in a stronger position than most give them credit for. As a bloc, the European Union is home to the world’s 2nd largest economy, boasting an output of 18.8 trillion USD in 2018. While they are currently going through a divorce, they have net gained firms which have fled Britain for the perceived security of The Continent. On top of this, chaos at 10 Downing Street and the White House has only made the EU stronger.
While business-friendliness can vary from one country to another, several firms have risen above challenges to offer fantastic dividends. At present, Europe is abandoning coal en masse. Amidst this rapid shift, Spain’s Enagas (BME:ENG) has been one of the big winners. While renewables growth has been strong, this energy class still suffers from intermittency problems. As Spain decommissions its coal plants, Enagas has stepped in to supply gas for peaker plants. While still a fossil fuel, natural gas is far cleaner than coal. Energy demand is surging in Spain right now – 17% YoY, and that includes a stunning 99% YoY increase for natural gas. Enagas also serves more than just Spain – their 10,000-kilometre pipeline network currently services eight EU countries. And recently, they went international, purchasing a stake in Florida-based gas distributor Tallgrass Energy. With an annual dividend of 7% and medium-term growth prospects, consider picking up this dividend stock.
While not technically in the EU, Swiss-based pharma firm Novartis (FRA: NOTA) should also be on your radar. While biotech and pharma stocks are usually volatile, Novartis earns steady cash flow from hit drugs that treat conditions like arthritis. However, they aren’t coasting on past successes – they are aggressively pursuing new opportunities, like gene therapies that fight cancer. They also are running trials to see if canakinumab, one of their biologic drugs, is effective at calming COVID-19 cytokine storms. Given the sector Novartis operates in, it’s remarkable that they offer dividends at all. Not only does it have a 3% yield, but they’ve issued it annually for more than two decades. Given their stable base, and short/medium-term potential for growth, you should think about adding this stock to your portfolio.
Going International Is The Safe Play
America has loads of profitable companies that issue huge dividends. Sadly, our stock market currently rests on a house of cards. We do not doubt that there is plenty of money to be made in the short-term. However, every economic indicator out there does not support the NYSE, the S&P, and NASDAQ at their current valuations.
In short, it would be irresponsible to be overweight on American dividend stocks right now. Take action now to diversify your portfolio – around the world, there are scores of reliable companies. Do this, and you’ll minimize damage to your passive income flows when the next big crash happens.