What's more, few of those have fully listed ADRs, so their shares can be very thinly traded.
That leaves income investors in a bit of a quandary since that's where the majority of the growth is found.
Even still, dividend-seeking investors would be wise to invest at least some of their money in fast-growing emerging markets and businesses outside the United States.
After all, the U.S. economy is mature, burdened with budget and debt problems, and subject to fierce competition from a lot of countries with much cheaper labor costs. It's also where we live, and the economy from which we derive our earnings.
It's simple risk-balancing, if nothing else.
However, all is not lost. There are a few global giants that will reward you with high-paying dividends, and today I'd like to highlight three of the best of them.
Three Ways to Bank Big Yields Internationally
Of the major international companies with fat dividends, the following seem to be the most attractive:
SK Telecom Co. Ltd. (NYSE: SKM): SKM is a major South Korean wireless telecom producer with more than 50% market share in its growing and sophisticated home market. As of December 31, 2011, the company had 26.5 million subscribers. The company also has an interesting add-on business in 11th Street. It's an online shopping mall that uses more advanced cellphone technology, including a new capability in high-definition voice communication, with exceptional call quality.
SKM's balance sheet is solid, with a 62% debt/equity ratio, and it trades on a trailing and forward P/E ratio of 8 times. Paying interim and final dividends totaling $1.24 in the past year, it currently yields 8.4%. On the plus side, its dividends are covered 160% by earnings. South Korea is technologically among the world's most sophisticated markets, so SKM is technologically at the cutting edge and its margins benefit thereby. SKM's next ex-dividend date is Dec. 31.
Seadrill Limited (NYSE: SDRL): Headquartered for tax purposes in Bermuda and operationally in Norway, Seadrill provides offshore oil and gas drilling services. It owns and operates a fleet of 59 offshore drilling units, available for drilling in shallow, medium and deep waters and in benign and harsh environments. In the second quarter of 2012 the company reported earnings of $554 million and earnings per share of $1.12, though that was impacted by a $169 million gain related to a merger. It also reported a record high order backlog of $20.3 billion.
Seadrill increased its quarterly dividend to 84 cents; it will go ex-dividend September 4. Its prospective P/E is 11.5, so its dividend yield of 7.9% is fully covered on a prospective basis. While oil prices remain at their current high levels, demand for Seadrill's services is likely to remain robust. Like SKM, SDRL is a market leader is its field, another assurance of future profitability.
Vale SA (NYSE:VALE): Finally, I recommend the Brazilian iron ore company Vale SA. Vale's share price has been knocked back this year because of falling iron ore prices and rising costs in Brazil. Vale is the world's second-largest mining company, the leading producer of iron ore and pellets, and the world's second-largest nickel producer. It also runs ports, makes steel and produces hydroelectric power, natural gas, and coking coal in Mozambique.
Even with lower iron ore prices, Vale's second quarter earnings were $2.7 billion, or 52 cents per share. The company currently trades on a trailing P/E of 6 times, a forward P/E of 5 times and is only 10% above book value. The company will pay a semi-annual dividend of 57 cents/share with an ex-dividend date of October 17. It currently trades on a yield of 6.9%. Even more interesting, its current dividend is 2.5 times covered.
So you see, investing abroad does not necessarily mean taking on more risk, giving up high dividend yields or suffering poor liquidity in your investment.
With the heft of these global giants, finding value and yield internationally is easy.
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About the Author
Martin Hutchinson has nearly 30 years’ experience as a global investment banker – plus a reputation for being bearish at just the right time. Slate magazine singled him out as the financier who most accurately predicted how bad the 2009 bear market would turn out to be. Martin is the editor of the Permanent Wealth Investor, where he focuses on stocks that pay high, reliable dividends. In his Merchant Banker Alert, Martin uncovers the fastest-growing companies in the fastest-growing economies and brings those ideas back home to you. Learn more about Martin on our contributors page.
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