As quantitative easing continues to depress the cost of money worldwide and the race for yield continues, we thought it would be timely to assess the yield on offer across the international universe. Historically, international stocks (particularly US based) have generally had relatively lower yields compared to Australian companies, due to the differing tax regimes across countries and reinvestment opportunities unique to each business.
We have conducted a screen of the highest yielding international stocks based on dividends expectations for the next two years. The top 20 is presented below. While the dividend yield is an important consideration, it is prudent to remember it is just one of many important considerations. Investors are advised to heed the advice of Warren Buffett: ‘More money has been lost stretching for yield than at the point of a gun’.
|Company||Prospective Yield||Year 2 Prospective Yield|
|Royal Dutch Shell plc||6.92%||6.57%|
|SGS Societe Generale de Surveillance SA||5.01%||6.42%|
|Altria Group Inc||3.93%||4.26%|
|British American Tobacco plc||4.00%||4.13%|
|Potash Corp of Saskatchewan Inc||4.04%||4.04%|
|General Electric Company||3.70%||3.97%|
|Hugo Boss AG||3.29%||3.82%|
|Ford Motor Company||3.49%||3.67%|
|Roche Holding Ltd||3.38%||3.61%|
From the list, we present the three following businesses which have particular appeal.
Hugo Boss AG (BOSSn.DE)
Value to Price: 14.0% (Future Value, FY)
Since its founding in 1924, German based Hugo Boss has successfully diversified away from military uniforms towards high end mens and women fashion, across its Hugo and Boss brands. The group operates a vertically integrated model which allows it to capture more of the value chain. The group generates the majority (60%) of earnings throughout Europe with important contributions from the US (25%) and the Asia Pacific (14%). While economic growth remains sluggish throughout Europe, a depreciating Euro is a large positive for the translation of foreign earnings and its competitiveness in foreign markets.
Chevron Corporation (CVX.N)
Value to Price: 4.2% (Future Value, FY)
Chevron is an integrated oil major with a geographically diverse earnings base. The largest earnings contributor for the company is its upstream operations; where close to 90% is generated through discovering and producing oil reserves. While oil prices are currently soft which is depressing near term earnings, Chevron has the financial strength to withstand the cycle.
Kone Corporation (KNEBV.HE)
Value to Price: -20.1% (Future Value, FY)
Founded in 1910, Finnish manufacturer Kone Corporation has expanded to become a leading international player in elevators and excalators. In addition to new installations, Kone generates 32% of its total revenue by servicing its installed product base, which adds a high degree of consistency to its earnings profile. Kone has a very strong balance sheet supported by over $1.2B of net cash.
The Clime International Fund has returned 16.3% over the past 6 months (as at January 31, 2015)*. To find out which stocks have driven this growth and our view on world markets in general, why not join us at one of our upcoming events.
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*Past performance is not a reliable indicator of future performance. Performance figures are for period: 1 August to 31 January ’15. For more details regarding our fund and its performance, visit our website: www.clime.com.au > Services > Clime International Fund.*