On the Revenue Exposure of Top 10 Companies in the MSCI Europe Index

Many multi-national firms based in the developed world have substantial exposure to overseas markets than their domestic markets. In fact, some derive a big portion of their revenue and earnings in foreign countries than their home countries. For instance, BHP Billiton Ltd is a FTSE 100 firm in the UK. However the mining giant earns most of its earnings from abroad for obvious reasons that the UK is an island and does not have many natural resources. So when looking for foreign stocks it is important to understand where they are most exposed to. In the BHP example, it is more dependent on the global economy than the British economy. So investing in BHP to gain exposure to the UK market will not be a wise move.

I came across an article recently that discussed the factors to consider for diversification using the MSCI Europe as an example. From the article:

  • Globalization has changed the diversification game. For decades investors could diversify their exposure to U.S. stocks by buying baskets of companies based overseas. But new global trade patterns have turned ideas and information, not just manufactured goods, into valuable products. This shift has blurred the lines and turned companies’ physical headquarters into just a mailing address. Successful global companies often collect more revenue outside their own home country borders. For instance, a review of S&P 500 company revenues shows that about 37% is derived from outside the U.S. Meanwhile, the 10 largest companies in the MSCI Europe Index get approximately 69% of revenues from outside Europe, in part due to slower growth in their region and better opportunities abroad.


Source: Global investing reality check, Capital Group

The companies listed above are shown below with their ADR tickers and current dividend yields:

1.Company: Royal Dutch Shell PLC (RDS.A)
Current Dividend Yield: 5.50%
Sector: Oil, Gas & Consumable Fuels
Country: UK

2.Company: Nestle SA (NSRGY)
Current Dividend Yield: 3.10%
Sector: Food Products
Country: Switzerland

3.Company: Novartis AG (NVS)
Current Dividend Yield: 3.50%
Sector: Pharmaceuticals
Country: Switzerland

4.Company: HSBC Holdings PLC  (HSBC)
Current Dividend Yield: 5.27%

Sector: Banking

Country: UK

5.Company: Roche Holding AG (RHHBY)
Current Dividend Yield: 3.53%
Sector: Pharmaceuticals
Country: Switzerland

6.Company: BP PLC (BP)
Current Dividend Yield: 5.46%

Sector:Oil, Gas & Consumable Fuels

Country: UK

7.Company: Total SA (TOT)
Current Dividend Yield: 4.53%
Sector:Oil, Gas & Consumable Fuels
Country: France

8.Company: British American Tobacco PLC (BTI)
Current Dividend Yield: 6.03%
Country: UK

9.Company: Siemens AG (SIEGY)
Current Dividend Yield: 3.25%
Sector:Industrial Conglomerates
Country: Germany

10.Company: Sanofi (SNY)
Current Dividend Yield: 4.13%
Sector: Pharmaceuticals
Country: France

Note: Dividend yields noted above are as of Aug 1, 2018. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure: No Positions

The above firms, except HSBC, are excellent multi-national firms with established track records. Investors looking to diversify with European companies can consider adding them in phases.

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