Dividend Stocks Return: U.S. vs. Canada, Australia

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The dividend yield of the U.S., Canadian and Australian equity markets as of March 18, 2013 was 2.1%, 3.0% and 4.2% respectively according data provided by The Financial Times.Generally U.S. equities tend to have lower dividend yields than foreign equities.

Recently I came across an article by Jonathan Jacob in Canadian Investment Review in which he discussed about how Canada outperformed the US. on dividend stocks. So I wanted to check the performance of U.S. dividend stocks against Canadian and Australian dividend stocks over different periods. In order to do this comparison, I used the MSCI High Dividend Yield indices.This index is composed of high dividend yielding stocks within an MSCI country index.

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MSCI-HDY-Index-Comparison

Data Source: MSCI

Note: The returns shown in the chart above are total returns and based on US dollars.

Australian income stocks beat U.S. stocks in all the periods shown above. In the past 10 years, the U.S. stocks returned 9.4% but Australian stocks outperformed this by a wide margin with a return of  17.7%. In the 5-year period also the difference in returns is significant. Though Canadian dividend stocks have lagged over the past one year, in the five and ten year periods they have yielded higher returns than U.S. dividend stocks. Please note that the returns mentioned here do not take into consideration withholding taxes on dividends paid by Australian and Canadian companies in the respective MSCI indices.

One key takeaway from this post is that U.S. investors can earn higher total returns especially in the long-term by investing in Canadian and Australian dividend stocks.

Related ETFs:

SPDR S&P 500 ETF (SPY)
iShares MSCI Canada Index Fund (EWC)
iShares MSCI Australia Index Fund (EWA)

Disclosure: No Positions

How To Invest In Preferred Stocks?

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One way to invest in preferred stocks is via ETFs. Three ETFs that invests in these types of stocks are listed below with their current distribution yields.

Preferred stocks are type of security that are both stocks and bonds. They get higher priority than common stocks when a company is liquidated and its assets sold and distributed to creditors.

Here is a definition from Wikipedia:

Preferred stock (also called preferred shares, preference shares or simply preferreds) is an equity security which may have any combination of features not possessed by common stock including properties of both an equity and a debt instruments, and is generally considered a hybrid instrument. Preferreds are senior (i.e. higher ranking) to common stock, but subordinate to bonds in terms of claim (or rights to their share of the assets of the company).[1]

Three ETFs to invest in preferred stocks:

1.Company: PowerShares Financial Preferred Portfolio (PGF)
Current Distribution Yield: 6.25%

2.Company: PowerShares Preferred Portfolio (PGX)
Current Distribution Yield: 6.39%

3.Company: iShares S&P U.S. Preferred Stock Index Fund (PFF)
Current Distribution Yield: 5.97%

Note: Distribution yields noted are as of Mar 18, 2013

These ETFs have higher yields than common stock ETFs. However there is one disadvantage with the preferred stocks and these funds. The dividends paid by the preferred stocks may not always be qualified dividends. Hence as ordinary dividends they will be subject to higher taxes. So before investing in these ETFs investors should carefully analyze them.

Disclosure: No Positions

The 32 Largest German Companies By Revenue 2012

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** UPDATE ** 

For the latest list checkout : The Top German Companies By Revenue 2016 (TFS)

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Germany has the largest economy in Europe and is a key member of the European Union. Unlike other European countries the German economy weathered the recent European crisis well and the country helps rescue other debt-ridden EU members. Germany is in the news this week due to its strict and harsh bailout conditions imposed via the EU on the tiny island country of Cyprus.

With a strong manufacturing base and an export-oriented economy Germany is considered as the powerhouse of Europe. Germany was also a pioneer in many innovative policies long before other developed countries.For example,  Kaiser William I also known as the Chancellor Bismarck introduced the pension system for older workers in the late 1880s. This program was later emulated by other countries.

Here are some interesting facts about Germany:

  • In 2011, Germany’s population was about 82 million.
  • Public debt as a share of GDP was about 82.0% in 2012.
  • The unemployment rate stood at about just 6.0% in January of this year.
  • The nominal GDP was $3.6 Trillion in 2011 making Germany the fourth largest economy in the world behind the U.S, China and Japan.
  • Last year Germany exported goods valued at over one Trillion Euros.
  • Germany is a net exporter.

Source: DeStatis

Germany continues its centuries-old  tradition of excellence in engineering and science. As a result today the country is home to some of the leading companies in the world such as BASF, BMW, Volkswagen, Bayer, etc.

Thousands of small and medium-sized companies called as the Mittelstand firms thrive in Germany. But at a global level large scale German multinationals dominate. For example, some of the top world-class companies are found in the Fortune Global 500 ranking.

The German firms in the Fortune Global 500 list for 2012 are shown below:

Country RankCompanyGlobal RankCityRevenues($ millions)
1Volkswagen12Wolfsburg221,551
2E.ON16Dusseldorf157,057
3Daimler21Stuttgart148,139
4Allianz28Munich134,168
5Siemens47Munich113,349
6BASF62Ludwigshafen102,194
7BMW69Munich95,692
8Metro72Dusseldorf92,746
9Munich Re Group76Munich90,137
10Deutsche Telekom89Bonn81,554
11Deutsche Post98Bonn76,307
12Deutsche Bank104Frankfurt74,425
13Robert Bosch110Stuttgart71,600
14ThyssenKrupp122Essen68,791
15RWE124Essen68,345
16Landesbank Baden-Württemberg128Stuttgart67,431
17Deutsche Bahn179Berlin52,808
18Bayer187Leverkusen50,790
19Continental241Hanover42,416
20Lufthansa Group248Cologne41,220
21Franz Haniel272Duisburg38,023
22Heraeus Holding293Hanau36,406
23DZ Bank334Frankfurt33,279
24Edeka Zentrale342Hamburg32,531
25Phoenix Pharmahandel363Mannheim30,023
26Commerzbank377Frankfurt29,236
27Energie Baden-Wirttemberg420Karlsruhe26,126
28TUI453Hanover24,356
29Marquard & Bahls455Hamburg24,258
30Fresenius479Bad Homburg22,973
31KFW Bankengruppe491Frankfurt22,496
32Bertelsmann492Getersloh22,427

Source: Fortune

As most of the German companies do not trade on the organized US exchanges the simple and easy way to invest in them is via the iShares Germany ETF (EWG).  The fund has $3.5 billion in assets and financials account for less than 17% of the portfolio.

Disclosure: Long E.ON(EONGY), RWE (RWEOY) and Fresenius(FMS)

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U.S. Oil and Natural Gas Production Rising

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Crude oil and natural gas production in the U.S. has strongly rebounded in the past few years according to an article by Thomas Helbling in the latest edition of IMF’s Finance & Development magazine. As a result, natural gas prices are at a 20-year low. But gasoline prices have not followed natural gas prices and have actually reached closer to the $4.00/gallon mark in recent weeks. Today however the average national price is at $3.659 per the gasbuddy.com website.

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US-Oil-Gas-Production-2001-2012

The IMF article notes that high crude oil prices and new technology have allowed produced producers to cheaply extract these resources from unconventional geological formations. The process of “fracking” in which fluids are injected under high pressure into rock formations such as shale rock to release trapped fuels has revolutionized oil and gas production at prices that are profitable to producers.

From the article:

Production of crude oil from unconventional sources increased about fivefold in the United States between 2008 and 2012, reaching close to 1 million barrels a day by the end of 2012. On average, shale oil—or light tight oil as it is often called—was about 16 percent of total U.S. production in 2012 and accounted for almost three-fourths of the 1.3 million barrel rise in overall daily oil production in the United States over this period.

So far, much of the increase in oil production has reflected field development in the Bakken Shale, which spans the western states of North Dakota and Montana—although in 2012, production in the Eagle Ford Shale in the state of Texas also started expanding rapidly. Eagle Ford area production is expected to continue to expand, and new field development and extraction should start in other known shale rock formations. Expanding development to other formations is necessary if production is to increase further.

At this point, the ultimate oil extraction potential from shale rock and tight sand formations in the United States is uncertain.

The author also notes that employment in the oil and gas extraction and mining sectors has almost doubled over the past decade. Last year some 570,000 workers were employed in these two sectors.  While employment levels in many other industries have declined in the past decade it is refreshing to hear that the energy and mining industries are creating jobs.

To be sure, the U.S. is still a net importer of oil. However U.S. EIA projects imports to shrink to from 8.3 million barrels per day to 6 million barrels per day at the start of 2014.

Back in January Bloomberg BusinessWeek published an article titled “Falling U.S. Oil Imports Will Reshape the World Crude Market“. From that piece:

If you had told an oil analyst seven years ago that by 2014 the U.S. would import only 6 million barrels of crude oil per day, or roughly a third of what the country uses, he would have been incredulous. Imports back then accounted for roughly two-thirds of U.S. oil consumption, according to the federal Energy Information Administration, and had been rising for 30 years. With all its major fields discovered and production dropping, America seemed destined to import more and more oil, especially from Canada, Mexico, Venezuela, Saudi Arabia, and West Africa.

US-Oil-imports

Then came hydraulic fracturing—the technique of blasting water into shale to extract oil and gas—and the energy picture in the U.S. changed dramatically in a few short years. Now the International Energy Agency predicts that by 2020, U.S. oil production will exceed Saudi Arabia’s. This is altering decades of established trading patterns.

Related ETFs:

United States Natural Gas Fund (UNG)
United States Oil Fund (USO)

Disclosure: No Positions

A Look at Two Large Food and Consumer Staples Retailers

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Walmart(WMT) and Costco(COST) are two of the large retailers that sell food and other consumer staples. In addition, they also sell consumer discretionary items. Both these companies offer membership-based wholesale bulk shopping stores for food and other items. Costcco operates these stores under the Costco brand while Walmart runs it under the Sam’s Club brand.

1.Costco Wholesale Corporation (COST)

Costco operates membership warehouses in the US, Puerto Rico, Canada, the United Kingdom, Mexico, Japan, Australia, and through majority owned subsidiaries in Taiwan and Korea. A typical store operates on a seven-day, 69-hour week schedule and is about 143,000 square feet in size. Each store carries thousands of products with many offered in bulk quantities. These stores are popular with consumers as they offer products at some of the cheapest prices anywhere.

Last year the company has about $103.0 billion in sales. In the most recent quarter Costco had revenues of $24.87 billion and made a profit of $547 million. At $101.75/shr the current dividend yield is 1.08%.

2.Walmart Stores Inc (WMT)

Walmart is the largest retailer in the world and is also the world’s largest employer. The company operates in all 50 states in the U.S., Puerto Rico and 26 other countries. Its Sam’s club unit accounted for about 12% of it net sales in 2012.

Walmart’s revenue in 2012 was about four times that of Costco’s at $469.0 billion. At the current price of $72.50 the dividend yield is 2.59%.

Here is a chart showing the long-term performance of the two companies and the S&P 500:

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WMT-Cost-SP500

 

Source: Yahoo Finance

Note: Dividend yields noted are as of Mar 15, 2013

Disclosure: No Positions