John Heinzl is the dividend investor for Globe Investor's Strategy Lab. Follow his contributions here. You can see his model portfolio here.
Darren Sissons was born in New Zealand and has lived in Australia, Taiwan, London and Canada. So it's perhaps not surprising that he looks globally when hunting for dividend stocks.
"There are opportunities outside North America that you can't necessarily get here," says the managing director with Portfolio Management Corp., a Toronto firm that caters to high-net-worth individuals.
Today, he'll be discussing five of his top international dividend picks. Before we get to them, a few caveats are in order.
Here at Yield Hog, I normally discuss Canadian and U.S. dividend stocks.
I don't typically venture outside North America because I'm more comfortable investing in what I know.
Besides, many U.S. companies – Procter & Gamble, Coca-Cola and McDonald's, for example – provide plenty of international exposure.
If you're investing abroad, you need to understand not only the company, but the economy and political environment. Also keep in mind that, depending on your broker, you may have to pay a higher commission than you would for a Canadian or U.S. stock.
(All of the following companies have American depositary receipts that trade on the U.S. over-the-counter market, with the exception of Unilever, which trades on the New York Stock Exchange.)
It's also worth noting that dividends from foreign companies are often subject to withholding tax.
Bottom line: Do your homework. For his part, Mr. Sissons says the extra work is well worth it given the breadth of great investing opportunities available in other countries.
A common theme with most of the stocks listed below is that the local government or the company's founding family own a large stake.
"In our experience, a major shareholder tends to be a positive factor," Mr. Sissons says.
Keppel Corp.
KPELY (OTC)
Yield: 4 per cent*
Based in Singapore, Keppel is one of the world's biggest builders of offshore oil drilling rigs. The company, in which Singapore's sovereign wealth fund owns a 21-per-cent stake, also has interests in real estate, power generation, water and logistics. The dividend has grown for 23 consecutive years and since 2000 the company has also paid eight special dividends. Mr. Sissons says the stock, which trades near five- and 10-year lows on a price-to-book basis, is attractively priced due to negative sentiment toward Asia and a slowdown in capital spending in the oil sector.
Kuehne & Nagel International AG
KHNGY, KHNGF (OTC)
Yield: 3.2 per cent
Switzerland's Kuehne & Nagel is a global logistics company engaged in sea freight, air freight and overland transportation. Klaus-Michael Kuehne, grandson of founder August Kuehne, owns a 53-per-cent stake and has run the company for more than four decades. "It's a very cash-rich business," Mr. Sissons says. Revenues have consistently grown faster than global GDP, he says, and the dividend has climbed at a five-year annualized rate of more than 10 per cent – not including special dividends that come along every few years.
Kone Oyj
KNYJY, KNYJF (OTC)
Yield: 3.1 per cent
Going up? Elevator maker Kone Oyj, based in Finland, has raised its dividend at a "phenomenal" five-year annualized rate of 25 per cent. It has also paid three special dividends since 2010. Although the stock is "a little expensive," the company is attractive because its elevators and escalators – found in Asia, Europe and North America – provide an ongoing revenue stream from regular servicing and maintenance. Controlled by the Herlin family since the 1920s, the company has a solid balance sheet and benefits from urbanization in developing countries.
MTR Corp.
MTRJY (OTC)
Yield: 3 per cent
MTR operates Hong Kong's Mass Transit Railway – one of the world's most profitable and reliable metro systems. It also manages transit in Stockholm, London, Melbourne and several cities in mainland China. Controlled by the Hong Kong government, MTR has raised its dividend at a five-year annualized rate of about 12 per cent. The current turmoil in Hong Kong has hurt the shares, but this could be a good buying opportunity if, as Mr. Sissons expects, a political solution is found. The company is also one of the biggest landowners in Hong Kong.
Unilever NV
UN, UL (NYSE)
Yield: 3.8 per cent
Anglo-Dutch consumer goods giant Unilever owns dozens of well-known brands, including Hellmann's, Dove, Becel, Alberto-Culver and Ben & Jerry's. The company has a strong balance sheet and has grown its dividend at a five-year annualized clip of 4.5 per cent. Because of a slowdown in emerging markets, "the company is now on sale. … I see this as the kind of stock you can buy and hold for 20 years without too much worry," Mr. Sissons says.
All yields are based on trailing 12-month dividend payments, excluding special dividends
John Heinzl