Most investors have heard of dividend aristocrats. These are the S&P 500 stocks that have increased their dividend payments for 25 years or more.
However, the yield on these stocks can be somewhat dismal. Consider the fact that CR Bard offers a 0.6% dividend yield, but has upped its dividend payment for 42 straight years.
Many investors also settle for subpar yields because they fail to consider companies not domiciled in the U.S.
That’s where international dividend achievers come into play.
These are international companies that trade on a U.S. exchange, which makes the stock more liquid and limits the risk of investing in overseas stock exchanges. These international dividend achievers have also increased their annual dividend payments in each of the last five years.
The PowerShares International Dividend Achievers ETF, which tracks the international dividend achievers, is up 13.5% over the last 12 months.
Meanwhile, the SPDR S&P Dividend ETF, which tracks the dividend aristocrats, is up only 7.8%.
What’s more is that the PowerShares International Dividend Achievers ETF offers a 3.1% dividend yield. The dividend aristocrat ETF has only a 2.25% dividend yield.
Here are the three must-own international dividend achievers:
Dividend Achiever No. 1: Ritchie Bros. Auctioneers (NYSE: RBA)
Canada-based Ritchie Bros. has managed to boost its annual dividend for 11 straight years and its current dividend yield is 2.2%. Via its auctions, it sells industrial equipment and other assets for construction and agricultural industries. Just under 50% of its revenues are derived from the U.S.
That doesn’t seem like much, but the opportunity lies in its ability to reward shareholders in the future. It recently hired former OfficeMax CEO Ravi Saligram. With a new CEO at the helm, we might finally see Ritchie Bros. put its superior balance sheet to work. With $136 million in net cash (cash less debt), Ritchie Bros. has one of the best balance sheets in the industry. It has enough cash to cover over 10% of its market cap.
But the stock has underperformed the S&P 500 by over 60 percentage points in the last three years. As the global economy continues to rebound, the demand for heavy equipment should increase and ultimately drive Ritchie Bros.’stock higher.
Dividend Achiever No. 2: Thomson Reuters (NYSE: TRI)
Thomson Reuters offers the highest dividend yield of the three companies, at 3.6%. And it has upped its annual dividend payment for six years in a row. In short, Thomson Reuters is the largest provider of financial information in the world. The company is domiciled in Canada and gets 60% of revenues from the Americas.
Thomson Reuters has the No. 1 market share in a couple of key areas when it comes to information providers. This includes legal info (topping LexisNexis) and tax info (topping Intuit).
Shares of Thomson Reuters fell off a cliff in 2008 when the financial crisis started to unfold. It’s yet to see a strong rebound like other financial companies. The Financial Select Sector SPDR is up 80% over the last five years, but Thomson Reuters is up a mere 20%.
The big driver for Thomson Reuters going forward should be a continued rebound in the financial services sector. The company has yet to get its profit margin back up to the low- to mid-teens that it was enjoying prior to 2008. There’s room for improvement there. However, it offers a dividend yield that’s well above the 2% it was paying back then. And its current dividend payment is just a 50% payout of operating cash flow.
Dividend Achiever No. 3: ACE Limited (NYSE: ACE)
This Swiss company is a leading provider of property and casualty (P&C) insurance and reinsurance. ACE Limited is really a total return play. It has upped its dividend for five straight years and it offers a 2.5% dividend yield.
That’s above the 1.9% P&C insurance industry average dividend yield. Its current annual dividend is only a 23% payout of earnings. Since 2012, it’s upped its quarterly dividend by 80%.
ACE Limited is still positioned quite nicely to continue rewarding shareholders. The company’s book value has doubled over the last five years and the company’s stock has climbed to over $100 a share — at all-time highs. The other aspect to rewarding shareholders is buying back shares. ACE Limited plans to buy back $2 billion worth of stock in 2014.
When screening for dividends, many investors only focus on U.S. companies, missing the great dividend-paying opportunities beyond the U.S. The three stocks above are the top picks among international dividend achievers.
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