Investors looking to build their wealth over the long term have countless options in the market today, including domestic and international stocks.
There are physical assets, such as real estate, in addition to the thousands of exchange-traded products available, and of course, thousands of individual stocks investors can buy.
Not all are created equal, of course, and one area that is often overlooked by U.S.-based investors is that of international dividend stocks. In general, international stocks tend to offer higher yields than their U.S.-based counterparts, and offer geographic diversification for an investor whose portfolio is U.S.-centric.
In this article, we’ll take a look at three international dividend stocks that we think are great picks for those looking for blue-chip dividends outside the U.S. Our three stocks offer consistent dividend growth and current income to shareholders, and we think they are great additions for those looking to diversify outside of the U.S.
For these reasons, we find them to be attractive dividend stocks for U.S.-based investors.
International Stocks to Buy: Unilever (UL)
Unilever is a consumer goods company that operates globally. Its products include beauty and personal care, foods and beverages, and home care. Through these segments, Unilever offers products such as deodorant, shampoo, ice cream, soup, seasoning, personal hygiene products, and more.
It was founded in 1894, is based in the U.K., generates about $60 billion in annual revenue, employs nearly 150,000 people, and trades with a market capitalization of $144 billion.
We see Unilever’s medium-term growth at 5% annually, which should be driven by its focus on less developed parts of the world, including Vietnam, Pakistan and Myanmar. The company has the ability to take advantage of rapidly expanding populations in these areas and others, and the burgeoning middle class that brings. As these higher-growth areas continue to see better market penetration, Unilever can boost the top and bottom lines more so than its developed markets such as Europe and the U.S.
We see Unilever’s competitive advantage as the strength of its global brands. The company’s century-plus long history of building market share across the world has led to Unilever owning some of the valuable consumer brands in the world. This affords its pricing power, which brings with it reliable earnings and cash flow. Unilever has used this to raise its dividend for a very impressive 40 consecutive years in its home currency.
Unilever’s dividend safety remains quite strong despite its four-decade streak of dividend increases, as we expect the payout ratio to come in right at two-thirds of earnings for the foreseeable future. Unilever’s payout has been in that area for many years and given its reliable free cash flow and earnings growth, we expect the company can continue to raise its payout for years to come without undue stress on the payout ratio. In short, Unilever’s dividend safety is excellent.
Diageo is an alcoholic beverage manufacturer that produces, markets, and sells its beverages worldwide. Diageo produces a wide variety of scotch, whiskey, gin, vodka, rum, liqueur, wine, beer and more.
Diageo was founded in 1886 and is based in the U.K. It produces about $18 billion in revenue, employs 28,000 people and grades with a market capitalization of $112 billion.
Similar to Unilever, Diageo’s primary growth catalyst is emerging markets, not those that are already developed. For Diageo, Latin America, China and India are the primary growth drivers in the years to come, fueling our 8% annual earnings growth estimate.
Diageo has the opportunity to take advantage of growing middle classes, which will have higher amounts of discretionary income, helping Diageo to build out its next leg of growth. The company buys back a small of number of shares as well, but this is not going to be a primary driver of growth, in our view.
Diageo’s competitive advantage stems mostly from its world-class brands, which afford it name recognition for consumers, and help drive premium pricing for its products. The company’s global supply chain and thousands of global distribution points help reinforce this advantage over time, and even help it thrive during recessions.
Diageo’s payout ratio is under 70% for this year, so we see the dividend as quite safe, particularly given how quickly earnings are expected to grow. That said, we don’t expect massive amounts of dividend growth, but do see dividend growth matching earnings growth over time. Dividend safety, however, is still quite strong.
International Stocks to Buy: Novartis (NVS)
Novartis is a healthcare company that operates globally. The company researches, develops, manufactures and markets its products through two operating segments. Novartis provides products such as treatments for ophthalmology, neuroscience, immunology, hepatology, dermatology, renal, cardiovascular and more.
The company was founded in 1996, is based in Switzerland, employs about 109,000 people, generates more than $50 billion in annual revenue, and trades with a market capitalization of $224 billion.
We see growth for Novartis at 4% annually in the coming years, driven by continued adoption of its wide variety of pharmaceuticals and other treatments. Novartis doesn’t focus on particular treatments, such as cancer, but rather built out a deep and wide portfolio of treatments that give it instant diversification, and recession resistance.
This is also the source of the company’s competitive advantage, given that it has four blockbuster products that are all producing at least $1 billion in annual revenue. The company also has over a dozen new drugs in the pipeline that should fuel the next leg of growth.
Novartis’ yield is outstanding at 3.5% currently, nearly three times that of the S&P 500. But even so, its payout ratio is just 55% based upon our current estimates for this year. The company has a quarter-century of local currency dividend increases, and we see Novartis’ dividend safety as very attractive, along with many more years of increases to come.
On the date of publication, Bob Ciura did not have (either directly or indirectly) positions in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Bob Ciura has worked at Sure Dividend since 2016. He oversees all content for Sure Dividend and its partner sites. Prior to joining Sure Dividend, Bob was an independent equity analyst. His articles have been published on major financial websites such as The Motley Fool, Seeking Alpha, Business Insider and more. Bob received a bachelor’s degree in Finance from DePaul University and an MBA with a concentration in investments from the University of Notre Dame.