International Stocks & Dividends… How To Profit

| March 28, 2011 | 0 Comments

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.

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.

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Category: Foreign Markets

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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