"The U.S. is an actively hostile dividend market and has been for years," says
In the U.S., companies often use their cash to buy back stock instead of paying dividends. But in other developed markets, Peris says there's a strong assumption that companies will pay out much or most of their earnings to shareholders as dividends.
The yields are also higher abroad.
Interest in dividends has climbed after they helped to stem losses during the "lost decade" of 2000-09 for stocks. The S&P 500 fell 24.1 percent after the dot-com bust and financial crisis swamped markets in succession. But after including dividends, the decade's loss was a less distasteful 9.1 percent. Besides potentially smoothing out the ride of stock investing, dividend payers can also supply income to investors contending with relatively low interest rates on bonds.
Perhaps most importantly, companies that pay dividends force themselves to be more disciplined in how they spend money, which can lead to better performance, says
When a company has to budget for its dividend, its managers are less likely to waste money on an ill-fitting acquisition or expansion. And companies typically fight to maintain their dividend even when times are tight for fear of an investor backlash. That's why Ruff sees a company's promise to pay a dividend as a signal of discipline, and he says he generally sees better signals for dividend stocks abroad than at home.
Investors plugged a net
To be sure, foreign stocks present their own set of risks. Emerging-market stocks in particular can gyrate sharply. Other considerations that investors should be aware of include:
— IRREGULAR SCHEDULE
In the U.S., investors have become accustomed to companies paying out steady dividends every three months. Abroad, the payment schedule isn't uniform. Some companies pay twice a year, others four. And the amounts may vary.
— CURRENCY RISK
One of the main risks of foreign investing is that swings in currency values can quickly erode any potential profit.
If a stock's price rises on the
Last quarter, for example, Japanese companies paid the equivalent of
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