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Dividend Hunters - Look Abroad!

Updated on February 9, 2012

Stock investing for the long haul is always an extremely wise decision. If, you are a short investor your gains will always not be as large as with your long held ones. Just because of the way, the market is, it will generally have numerous ups and downs over a tumulus week.

To cover the majority of the fluctuations in the market investors tend to go with some types of stocks that will pay them a profit. These stocks known as dividend stocks are away to help keep your portfolio still earning money while the stock price is down. Even in the event of a temporary down the stock price on some of the common blue chips stocks, on the U.S exchange, they will still continue to pay out the normal dividend. So, you are still making money even when the stock price is down.

Many investors continue to see safe investments here in the U.S not only with dividend stocks, but Money market CDs or bonds. But, with the historically low interest rates coming out of the Federal Reserve it is a wonder if you are even getting 1% back on your money. So, what are your options if the blue-chip dividends are not rising and your money is not growing? Invest in foreign dividends.

Foreign Dividends

Some of the best dividend rates right now are being offered by foreign companies. These companies abroad are paying out dividend yield s of up to 15% from the average here in the U.S of only 5%. Many foreign companies have a long history of sharing there profit. Which means more for their shareholders, since they are the ones investing in the company. This allows them to pay higher payouts when the company has positive returns in the markets.

Some premium examples of foreign companies offering high dividend yields and are trusted established brands.

Blue Square Israel 45.62%

Argentine gas utility Transportadora de Gas del Sur 38.2%

CorpBanca of Chile 24%

Brazilian Telecom 12.1%

What to know about foreign Dividends

There are some basic things you should realize about foreign investments.

Dividend payouts:

When companies in foreign countries decide to payout n dividends, it is much different approach then in the U.S.

Irregular: Foreign companies will only pay out once or twice a year and the date may change from year to year.

Amount of Dividend: The mount of the dividends are usually much higher, but they are not fixed. The company will only payout enough of the dividend that they can afford and not a fixed one.

Dividend Taxation: When it comes to taxing dividend income many countries have different rules and regulations. Some countries like Argentina or India do not charge taxes on dividends. While others, for example, Switzerland or Germany has 30% tax rates on their dividend payouts. So, always make sure you understand the tax rates on dividends in the country of your investment.

Tax Credits: The U.S has invested a lot in getting treaties setup with many forigen nations regarding sock trading and taxations. These treaties allow U.S investors to receive any credit for taxes paid to the foreign government when they receive dividends. Foreign tax credits can be carried back 1 year and carried forward 10 years. So, there are many ways you can take advantage of this tax option so talk with a qualified investor or tax specialist to get the most benefit from these dividend tax credits.

Currency Risk: When doing business in a foreign country do not expect to have that the company always pay in U.S dollars. Most will only pay dividends in their local currency so you will need to have these exchanged into U.S dollars. So, it is a terrific idea to get a basis of the currency exchange rates for the country you are investing in and make sure the exchange rates do not eat too much of the dividend payouts.

Where to look for foreign companies with dividends:

ADR: There is a list of foreign companies listed on the U.S stock exchange already. You just need to screen your stock screener to look for ADR companies. Currently there are about 900 foreign companies listed on the market. Out of that 900 about ½ are paying dividends to their shareholder. One of the downsides to ADR investments, is they will soon become adapted to the way the U.S companies pay dividends. So, to get the most for your money invest directly in the company from using non us listed companies.

ETFs: There are stock exchanges specifically tailored to individuals that want to trade on foreign stock exchanges. These EFTs are purely focused on getting investors the maximium amount of dividend income possible some of the principal players are:

1 Dow Jones STOXX European Select Dividend Fund which yields 9.6%

2 Dow Jones International Select Dividend Index Fund which yields 4.2%


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