In a previous article I discussed the pros and cons of international diversification. I came up with more cons for dividend investors than pros. I tried to look at international exposure using another angle, and calm down US dividend investors that increased international exposure would not really add that much to the stability of their dividend incomes.
In the table below, I have listed the ten companies with the highest weight in the S&P 500. In addition, I have also listed the percentage of revenues that each one of these companies derives from their international operations. The ten companies with highest weight in the index accounted for approximately 18% of S&P 500. On average, these global companies derived 48% of their revenues from international operations.
|
Name
|
Ticker
|
Sector
|
Weight
|
International
Sales
|
|
Apple
Inc.
|
AAPL
|
Information
Technology
|
3.46
|
61%
|
|
Exxon
Mobil Corporation
|
XOM
|
Energy
|
2.3
|
64%
|
|
Microsoft
Corporation
|
MSFT
|
Information
Technology
|
2.18
|
52%
|
|
Johnson
& Johnson
|
JNJ
|
Health
Care
|
1.69
|
55%
|
|
General
Electric Company
|
GE
|
Industrials
|
1.46
|
53%
|
|
Berkshire
Hathaway Inc. Class B
|
BRK.B
|
Financials
|
1.45
|
16%
|
|
Wells
Fargo & Company
|
WFC
|
Financials
|
1.41
|
5%
|
|
Procter
& Gamble Company
|
PG
|
Consumer
Staples
|
1.3
|
65%
|
|
Chevron
Corporation
|
CVX
|
Energy
|
1.29
|
59%
|
|
JPMorgan
Chase & Co.
|
JPM
|
Financials
|
1.28
|
45%
|
Each of these companies has different year-end dates. I tried to analyze the latest annual reports and other publicly available corporate information out there, which was 2013 for the majority of situations.
If we were to extrapolate the results from this sample to the whole universe of stocks in the S&P 500, one can conclude that a large portion of revenues for US companies is derived from international operations. As a result, US investors who purchase shares in US multinationals such as Procter & Gamble (PG) or Johnson & Johnson (JNJ) can gain international exposure simply by investing in these US stocks. These global conglomerates operate businesses in many countries, and generate diversified streams of income from these international locations. These cashflows are then used to grow the business, with the excess distributed to shareholders as dividends.
As a result, I believe that adding internationally listed stocks would not dramatically improve the performance of a dividend portfolio. By purchasing US stocks with global operations, the domestic US dividend investor gains exposure to global income streams, without the hassle of international taxation or learning international accounting rules.
Full Disclosure: Long XOM, JNJ, GE, BRK/B, WFC, PG, CVX
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- International Dividend Stocks – Pros and Cons
- Dividend Investors Should Ignore Market Fluctuations
- Dividend Growth Investing Works for Everyone Willing to Put the Time Into It
- My Retirement Strategy for Tax-Free Income
- Do not despise the days of small beginnings
