In earlier posts, we looked at the top foreign dividend stocks in the New York Stock Exchange and the OTC markets. In this post, let us review some of large cap Canadian stocks that have yields of more than 3%.

NYSE-listed Canadian stocks paying more than 3% dividends :

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All the five large Canadian banks are in this list. TD Bank is betting big on the US market. This month TD purchased three failed banks in Florida. Bank of Nova Scotia has a strong presence in the Caribbean and Latin American markets. Telus, BCE and Rogers Communications operate in the telecom and related areas. Enbridge (ENB) operates the world’s longest crude oil and liquids pipeline in the U.S. and Canada. TransCanada is a pipeline operator and also a power producer. Sunlife (SLF) is a financial services company offering life and health insurance, savings, investment management and retirement products.

Some of the large foreign companies are listed on the OTC markets instead of the organized exchanges. Rising listing fees and burden-some regulatory requirements are two of the reasons that these large firms prefer not to list in the NYSE, NASDAQ or Amex exchanges.

Investors looking to add some foreign equity exposure to their portfolio can find high quality, large cap stocks on the OTC markets. The following table lists 31 stocks that have market capitalization of over $5B and dividend yields of more than 3%:

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It must be noted that some of the above mentioned stocks may be thinly traded and accordingly price spreads may be very high. However many of these companies are large global companies with strong presence in many markets in addition to their home countries. For example, German utilities E.ON (OTC: EONGY) and RWE (OTC: RWEOY) are some of the largest utilities in Europe and have operations in multiple markets. In the banking sector, Australian banks National Australia Bank(OTC: NABZY) and Australia and New Zealand Banking (OTC: ANZBY) offer great yields and emerged strong from the credit crisis. Two other banks noted here are Hong Kong-based The Bank of East Asia and South Africa-based NedBank. Two of the chemical companies in the list are Germany-based BASF (OTC: BASFY) and Belgium-based Solvay. Calgary, Alberta-based integrated Canadian energy company Husky Energy(OTC: HUSKF) focuses on petroleum and natural gas exploration.

Investing in foreign stocks is an integral part of a well-diversified portfolio. There are many reasons for this strategy. Some of them are noted below:

• The total market capitalization of all stocks listed in the New York Stock Exchange is about $11.8 Trillion as of Dec 31,2009. Over 400 foreign stocks account for a significant portion of this total market capitalization
• Last year in US dollar terms the market capitalization of Shanghai, Bombay, Bovepsa exchanges grew by 89%, 101% and 125% respectively while the market cap of NYSE grew by only 28%
• More capital for IPOs and secondary market issues is raised in foreign markets than in the US exchanges

(Source: World Federation of Exchanges)

Many foreign stocks have traditionally paid higher dividends than US stocks. Investors can profit handsomely picking up some of these dividend payers. For example, I started a small position in a foreign bank back in 2006. So far I have received 29% of my original investment in just dividends and my current yield is over 10%. With dividend reinvestment and rise in share price, the total return is much higher. It must be noted however investing abroad comes with additional issues such as exchange rate risk, political risk, taxation, volatility, etc.

To identify some of the high yielding large cap foreign stocks, I ran the screener with the following criteria:

1. Stocks must trade on the NYSE
2. Market cap must >= $5B
3. Dividend yield must be at least 3%

Large NYSE-listed foreign companies with dividend yields of 3% or more:

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Note: Canadian stocks are excluded in this list

Key Takeaways:
1. Just 6 of the stocks in the list are in the financial sector

2. Some of the global oil companies such as Royal Dutch Shell (RDS.A), TOTAL (TOT),  have excellent dividend yields

3. Of the telecom-sector stocks, Telefonica of Spain(TEF), France Telecom (FTE) and Deutsche Telecom (DT) pay over 6% dividends

The IBEX 35 is the main stock market index of Spain. This index contains the 35 most liquid stocks traded on the Madrid Stock Exchange. In terms of performance, the IBEX 35 is down 8.6% year-to-date.

The IBEX Top Dvidendo Index includes the 25 companies with the highest dividend yield on the Spanish market. BBVA Asset management’s Accion IBEX Top Dividendo ETF(Ticker: BBVAT in the domestic market) tracks this index.

The constituents of the Accion IBEX Top Dividendo ETF are listed below together with their ADR ticker and the current yield if available:

1. Banco Sabadell SA (OTC: BNDSY)
2. Enagas (OTC: ENGGY)
Current Dividend Yield: 1.94%
3. Gestevision Telecinco SA (OTC: GETVY)
4. Ferrovial SA (OTC: FRRVY)
5. Bolsas Y Mercadoes Espanoles (OTC: BOLYY)
Current Dividend Yield: 2.87%
6. Criteria Caixa Corp (OTC: CIXPY)
7. Gas Natural SA (OTC: GASNY)
8. Fomento De Construcciones Contratas (OTC: FMOCY)
9. Acciona, SA
10. Endesa (OTC:ELEYY)
11. Iberdrola (OTC: IBDRY)
Current Dividend Yield: 4.84%
12. Grupo Duro Felguera
13. Miquel Y Costas
14. ACS. Activifades Const. Y Servicios (OTC: ACSAY)
15. Repsol (REP)
Current Dividend Yield: 4.95%
16. Telefonica (TEF)
Current Dividend Yield: 6.37%
17. Unipapel
18. Viscofan
19. Zardoya Otis
20. BBVA (BBVA)
Current Dividend Yield: 5.72%
21. Banco Espanol De Credito (OTC: BNSTY)
22. Banco Popular Espanol
23. Banco Santander SA (STD)
Current Dividend Yield: 8.90%
24. Mapfre (OTC: MPFRY)
25. Dinamia Capital Privado

Since most of the Spanish stocks mentioned above do not trade on the organized exchanges, US investors can get exposure to these and other top Spanish stocks via the iShares MSCI Spain ETF (EWP). The ETF has an asset base of $204M and contains 29 companies in the portfolio.Financials make up about 43% of the fund.