How to Boost Your Income Stream by 10%-Plus… in a Single Year
I’ve told you before about the enormous number of high-yielding stocks abroad. If you remember, my research team and I found only 17 profitable U.S. companies were paying yields of more than 12%… compared to 227 overseas.
Although the numbers fluctuate daily, that means roughly 92% of the world’s highest yields are found outside of U.S. markets. To me, the amount of high-yield international dividend-payers out there is one of the market‘s biggest secrets.
But there’s another big potential benefit to investing in international companies that most investors fail to consider.
This simple move could make investors extra gains of 10% or more — even in a single year. It doesn’t require any extra effort… in fact, it happens automatically when you invest in international companies.
Here’s how it works…
Let’s say six years ago, you took the trip of a lifetime to Australia. Back then, $1 U.S. bought you roughly $1.30 Australian. That means a hotel room priced at $100 Australian dollars only cost about $77 U.S. dollars, thanks to a favorable exchange rate.
But today, even though the U.S. dollar has seen some gains of late, in relative terms it has plummeted against most currencies — including the Australian dollar. It now trades at a 5% discount to the Aussie dollar. So that $100 room in Aussie dollars will now cost you $105 U.S. dollars — a 36% increase, even though the hotel’s rate didn’t change.
What does this have to do with increasing dividends? Well, what’s bad news for your vacation is great news for your international income investments.
Say you bought an Australian company five years ago that paid a dividend of 10 Australian dollars each year. Back then, you would have earned $7.70 in U.S. dollars after conversion.
But today, that same 10 Aussie dollar dividend would be worth $10.05 in the U.S… or 31% more.
The bottom line is if the U.S. dollar weakens versus other major foreign currencies, then your dividends will increase over time… even if the company you invest in keeps its dividend payment the same.
The best news is that despite a recent rally, I see the downtrend in the dollar continuing over the long-term. That will help investors looking abroad.
And I’m not the only one who thinks this:
“The dollar is enjoying a safe-haven status, but long run I’m not a fan of the U.S. dollar. Our country has too many problems.” “Don’t Like a Weak Dollar? Might As Well Get Used to It” |
But it’s not just dividends that benefit from a falling dollar when you invest abroad. Every dollar you invest sees the effects as well.
Recognizing this trend years ago — and investing alongside it — has already given international income investors a major boost.
You can see for yourself how the falling dollar has helped score some great returns in international markets…
Selected Market Returns Since 2006 | ||
Country | Return in Home Currency | Return in U.S. Dollar Terms |
Peru | 111.2% | 160.9% |
Chile | 94.9% | 121.7% |
Thailand | 71.3% | 105.0% |
Brazil | 54.1% | 65.8% |
Taiwan | 13.7% | 24.5% |
New Zealand | -21.6% | 2.5% |
United States | 10.1% | 10.1% |
* Data from 08/07/06 – 08/07/12. S&P 500 return includes dividends |
This table makes it easy to see how a falling dollar actually helps… if you’re invested abroad.
Notice that the New Zealand market actually declined over the past five years when measured in New Zealand dollars, but it’s showing a gain for U.S. investors when you factor in the falling U.S. dollar.
Now keep in mind, if the dollar were to rally, the opposite would happen. Your returns and dividends would lessen by the amount the dollar strengthens. And while the dollar has rallied recently — for a variety of reasons I won’t bore you with today — I think the U.S. dollar will continue to lose value in the coming years.
That gives income investors plenty of time to take advantage of this unique opportunity.
And in my opinion, there’s no easier way right now to boost your profits. Especially since you can own many of the world’s highest yielders without even leaving the U.S. markets.
For more on international dividend-payers, I invite you to watch my latest presentation. I’ve included names and ticker symbols of the 17 American companies that yield more than 12% (some as high as 19.7%) and several high-yield international plays. Visit this link to watch now.