Dividend Yields for Select Countries 2021

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Dividend yields of equity markets are generally higher in countries of the US. This is true especially in developed Europe where the dividend culture is more traditional and deep-rooted. Some emerging markets also offer attractive dividend yields. For income investors based in the US, the smart strategy is identify these opportunities abroad and spread their assets across countries and industries to capture higher yields. Currently the S&P 500 has a dividend yield of 1.38%.  Certain sectors such as utilities, consumer staples, etc. offer higher yields around 3% or so. However the maximum yields of these sectors is still lower than yields in some developed markets such as Australia, Singapore and UK for example. Even with any applicable dividend withholding taxes, ADR fees, foreign exchange impacts, etc. it is possible to earn higher yields than in the US.

The following chart shows the MSCI dividend yields for select countries and the interest rates on 10-year government bond as of Dec, 2020:

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Source:  Alliance Global Investors Dividend Report 2021 via the Corner

Among the developed European countries, traditional dividend champion UK is at the top followed Norway. Spain is projected to the top dividend payer this year. Of the BRIC countries, Russia has the highest yield while India has the lowest. As noted earlier Singapore is also far ahead of many other countries including neighboring Malaysia. In the beginning of 2021, the US dividend yield based on MSCI indices stood between Ireland and Philippines.

With that said, investors looking for foreign dividend stocks can consider the following options for further research and investment:

1.Company: National Grid PLC (NGG)
Current Dividend Yield: 8.46%
Sector: Multi-Utilities
Country: UK

2.Company:Commonwealth Bank of Australia (CMWAY)
Current Dividend Yield: 2.40$
Sector: Banking
Country: Australia

3.Company: Westpac Banking Corp (WBK)
Current Dividend Yield: 3.42%
Sector: Banking
Country: Australia

4.Company: Enbridge Inc. (ENB)
Current Dividend Yield: 6.93%
Sector: Oil & Gas
Country: Canada

5.Company: DBS Group Holdings Ltd(DBSDY)
Current Dividend Yield: 2.46%
Sector: Banking
Country: Singapore

6.Company: Eni SpA (E)
Current Dividend Yield: 3.57%
Sector: Oil and Gas
Country: Italy

7.Company: TELUS Corp (TU)
Current Dividend Yield: 4.70%
Sector: Telecom
Country: Canada

8.Company: TotalEnergies SE (TTE)
Current Dividend Yield:
Sector: Oil, Gas & Consumable Fuels
Country: France

9.Company:  NK Lukoil PAO(LUKOY)
Current Dividend Yield: 9.41%
Sector: Oil & Gas – Integrated
Country: Russia

10.Company: Unilever PLC (UL)
Current Dividend Yield: 3.33%
Sector: Food Products
Country: UK

Disclosure: Long WBK

A Review of the Economy of Mexico

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The economy of Mexico is the 11the largest in the world at about $2.4 Trillion. The Mexican economy is closely integrated with the economies of the US and Canada due to USMCA (previously NAFTA). According to the CIA’s World Factbook, Mexico has free trade agreements with 46 countries. The country is the second largest export market for the US and is also the third largest source of imports. The major sectors of the economy are services, industry and agriculture. Agriculture accounts for just under 3.5% of GDP.

Select Indicators for Mexico:

Source: OECD

Unlike in the past, the manufacturing sector has experience tremendous growth in the past few decades. Automobile and other manufactured goods export account for over 50% of Mexican exports as shown in the graphic below:

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Source: Is Mexico’s President a Threat to Its Democracy?, WSJ

Mexico continues to attract foreign capital especially in the automotive and tech sector due to its close proximity to the US and growth of near-shoring by American and foreign manufacturers. Despite all the positive factors,  the country is plagued by corruption, high inequality and violence unleashed by the powerful drug cartels. So the flow of migrants into the US is unlikely to stop for the foreseeable future.

U.S. Banks vs. European Banks – Equity Performance Gap Since 2007

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European bank stocks are recovering after a decade of disastrous performance. While US banks have recovered from the Global Financial Crisis(GFC) and also the Covid pandemic, banks from Europe barely survived. In addition to these, some of the other factors that crushed European lenders include the many years and iterations of sovereign debt crisis, money laundering scandals, the Great British Brexit saga, uncovering of outright frauds, lack of profitability, inefficient operations, etc. Even pretty basic things like maintaining 24×7 services seem to be a herculean challenge for British banks. It is not uncommon for British lenders to have technical outages for all kinds of silly reasons. Across the continent, many of the lenders maintain thousands of loss-making retail branches as if most customers do not have a computer, internet or a cell phone. Countries like France and Spain are dotted with thousands of such branches.

The following chart from a recent Bloomberg article shows the Atlantic size gap between American and European banks in terms of performance since 2007:

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Source: European Bank Stocks Lead Rally After a Decade of Disappointment, Bloomberg

The full article is worth a read.

 

The Top 30 Stocks in the S&P 500 over the Past 30 Years

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I came across the below list showing the top 30 stocks in the S&P 500 index in terms of annual returns over the past 30 years from May 1991 thru May 2021. The best stock during this time period was Netflix(NFLX) with an annualized return of over 38%. Though it is interesting to review this list and marvel at the astonishing wealth that could have been built, it is not that easy to say the least. For one thing, this chart does not show all the trials and tribulations and investors have had to go thru during these years where some of these stocks plunged dramatically. From Netflix to Amazon(AMZN) to Apple(AAPL) and a few other tech stocks in this list fell 50% or more during the period and then recovered. Not many investors may have had the courage and patience to wait out such losses.

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Source: The Ultimate Superpower in Investing by Charlie Bilello, Compound Advisors

It should noted that all the tech stocks listed above benefitted from the dot com boom and the semiconductor stocks got a boost in recent years due to the pandemic, chip shortage, crypto craze, etc. It is unlikely these combination of events would emerge again in the future.

Similarly one-hit wonders such as Monster Beverage(MNST) are an anomaly. A few years ago when energy drinks turned into a fad the company’s stock skyrocketed.

Disclosure: No positions

Time to Recover to Pre-Pandemic GDP Per Capita For Select Countries: Chart

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Economic recovery is underway in most countries of the world. China’s economy was the least adversely impacted last year due to the swift control of the pandemic. However most the developed countries are now in a better position to grow their economies with the invention of the vaccine last year. After initial dithering and chaos in the vaccine deployment, developed Europe is now catching up with the UK and US in terms of vaccination rates.

The economies of emerging and frontier countries may struggle for a while since they haven’t procured enough vaccines for all their citizens. So with the exception of a few, recovery is going to be slow and take many months if not years to recover to pre-pandemic levels.

The following chart from OECD shows how long it will take to recover to pre-pandemic GDP per capita for select countries. Argentina’s economy is projected to recover to pre-pandemic levels beyond 2025. This is not surprising since the country is the basket case of how to mismanage an economy and had structural problems long before the pandemic. The pandemic only prolongs the misery for the country.

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Source: OECD Economic Outlook May 2021