The dividend yield of the S&P 500 has stayed at around 2% for many years.Investors looking for higher yields can consider foreign equities many of which have much higher dividend yields.Traditionally European companies tend to have higher dividend yields than U.S. firms.
Despite withholding taxes on dividends imposed on U.S. investors by most foreign governments and other factors, its still possible to earn higher dividend income by investing in foreign companies than their U.S. counterparts. In this post lets a take a look at how the dividend yield of five large-cap foreign companies compares with their U.S. peers.
1. The current dividend yield of French oil major Total SA (TOT) is 5.22%. Some of its U.S. peers such as Exxon Mobil Corp (XOM) and Chevron Corp (CVX) have yields of only 2.77% and 3.31% respectively.
2.The American tobacco giants Lorillard Inc(LO) has a dividend yield of 4.12%.The equivalent British company Imperial Tobacco Group PLC (ITYBY) has a yield of 4.56%.
3.British mobile telecom giant Vodafone Group PLC (VOD) has a dividend yield of 6.83% compared to AT&T Inc(T)’s 5.26% and Verizon Communications Inc’s(VZ) 4.26%.
4.American food companies Kellogg Co(K) and General Mills Inc(GIS) have dividend yields of 3.02% and 3.07% respectively.Their Swiss peer Nestle SA pays a dividend of 3.12%.
5.US chemical makers E I du Pont de Nemours and Co(DD) and Dow Chemical Co(DOW) 2.84% and 2.76% respectively.However their German peer BASF SE(BASFY) has a dividend yield of 3.64%.BASF is the world’s largest chemical company.
Please note that I have selectively picked the above examples. We can find foreign companies that have dividend yields that are the same or even lower than that of U.S. firms. The point here is to emphasize the importance of looking abroad for dividend income.Withholding taxes on foreign dividends may wipe out any gains due to the higher dividend yields of foreign companies. However some countries such as Canada waive the tax if the security is held in qualified retirement accounts such as 401(k), Traditional and Roth IRAs, etc.
Note: Dividend yields noted above are as of Aug 29, 2014. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.
Disclosure: Long GIS
