International Stocks & Dividends… How To Profit
The Dynamic Wealth Report
March 28, 2011
This weekend my brother and his kids paid us a visit… they wanted to see
our new baby horse. Of course being kids, they were bored within
ten
minutes. Eventually they wanted something to eat. So I whipped up a few
peanut butter and jelly sandwiches.
Some things in life naturally go together.
And I have to admit, peanut butter and jelly (PB&J) is one of them. What
makes PB&J so great is the simple ideas behind each part. Peanut butter
alone is good. Jelly alone is good. But, smash them together and
what
you get is nothing short of fantastic.
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Ok, so I’m going a little bit overboard… but you get the idea.
Combining two good ideas and arriving with a
great idea is incredibly
powerful. And that got me thinking about great ideas for investing.
Just consider these two themes - Dividend Stocks and the Falling Dollar.
You’ve heard of each of these investment themes individually… but have
you considered putting them together? I’ll show you how in a
moment…
First, let’s take a look at the dividend stocks theme.
If you’ve spent any time trading the markets, you know about the dividend
cult. It’s a group of investors investing on one idea and one idea
alone… dividends.
They buy stocks to sock away their quarterly (and sometimes monthly)
dividend payment. This group of investors lives for the dividend yield.
By the way, a stock’s dividend yield is simply the dividend divided by
the price.
Let me give you an example. Take Verizon (VZ), it just happens to be a
stock I own in my own portfolio. Last year they paid a dividend of
$1.95… and right now the stock is trading for $37.45. Their yield is
5.2%. To calculate the dividend yield, simply divide the dividend (1.95)
by the price (37.45) and multiply the result by 100.
Or you can just look it up on Yahoo! Finance.
Now, a 5.2% yield isn’t bad. At this rate, in less than 20 years, you’ll
get more from the company in dividends than you’ve paid for the stock.
Many investors have retired off of yields like this! You can see the
power behind investing in dividend stocks.
Now, let’s look at the second theme… profiting from the falling dollar.
If you’ve been a reader of the Dynamic Wealth Report for a while, you’ve
no doubt heard us talk about this over and over again.
To keep us out of another recession, the Federal Reserve is taking some
amazing steps. They’ve spent the better part of two years flooding the
market with money. Big Ben has cut interest rates to nearly zero and
they’ve deployed hundreds of billions of dollars of quantitative easing
The Federal Reserve is creating new US Dollars out of nothing.
Here’s the problem… any first year economics student knows about supply
and demand. The more supply there is the faster the value of something
falls. And that’s exactly what’s happening right now with the US Dollar.
The flood of cheap US Dollars is depressing their value relative to
other currencies. So as the US Dollar falls in value, other currencies
often climb in value.
It’s a big theme in the currency markets… and one that many investors
have made big money off of. But how can you participate?
Like peanut butter and jelly, combine dividend investing and the falling
dollar…
All you have to do is start investing in good quality dividend paying
companies abroad. The dividends paid in a home currency become even more
valuable when they are translated back into US Dollars.
Consider this, if you have a 5% dividend yield from a foreign stock,
that’s not bad. But, if the US Dollar slides 10%, your yield increases by
half a percent. Your 5% dividend becomes a 5.5% dividend in US Dollars.
Now half a percent doesn’t sound like much, but taken over 10 or 20
years, it can be the difference between prime rib or cans of tuna!
So what’s the easy way to invest in foreign dividend paying stocks?
As always, you can do the work yourself. Or you can do it the easy way…
I’m all for the easy way! Take a look at the WisdomTree Emerging Markets
Equity Income Fund (DEM). This fund invests in a basket of 269 stocks
all trading overseas. The fund is spread out over various sectors
including: Telecom, Financials, IT, Materials, Utilities, and Consumer
Staples… each sector represents more than 8% of the portfolio.
The fund is also spread out over 19 different emerging markets.
The top five are Taiwan, Brazil, Turkey, South Africa, and Israel. They
pay a healthy 3.37% dividend… and I see it growing significantly as
these dividend paying stocks increase payouts. Remember, the emerging
market economies are poised for some amazing growth over the next few
years.
Consider investing in DEM… it’s the peanut butter & jelly sandwich of
the investing world.
***Editor's Note*** There's still time to get
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portfolio.
• Coal Industry (Up 12%)
The nuclear meltdown (or near meltdown) in Japan is continuing to worry
the world. As a result, public opinion is being swayed away from nuclear
energy back into “safer” technologies. Coal is one of the industries
thriving on this calamity… the industry is up over 12% in the last
month.
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