While U.S. companies have boosted their cash payouts to shareholders, income-minded investors are still seeking out attractive foreign dividend stock and related exchange traded funds.
Money managers believe that the most attractive dividend stocks are outside U.S. markets, reports Stan Choe for Boston Globe.
‘The [United States] is an actively hostile dividend market and has been for years,’’ Daniel Peris, senior portfolio manager at Federated Investors, said in the article.
In the U.S., more companies are using their cash hoards to buy back stocks instead of dishing out dividends. Peris points out that in other developed markets, investors expect companies will pay out much more or most of their earnings to shareholders as dividends.
For instance, HSBC Holdings, the largest company in the U.K., paid out 58% of its earnings per share last year in dividends, whereas the average company from the Standard & Poor’s 500 index paid out 35% of earnings as dividends.
Moreover, average yields are higher abroad. For example, U.K. stocks show an average dividend yield of 3.3% while other European markets provide 3.1% yields. The e iShares MSCI United Kingdom ETF (NYSEArca: EWU) has a 2.31% 12-month yield and the Vanguard FTSE Europe ETF (NYSEArca: VGK) has a 3.75% 12-month yield.