After some additional research however, it seems that the differences in overall valuation has more to do with the different sector composition of foreign stock indices versus the sector composition of the US stock market. For example, foreign consumer staples companies like Diageo (DEO) and Unilever (UL) are just as expensive as their US counterparts.
For readers who are willing to do a little bit more research, there is the possibility to uncover hidden dividend gems abroad, which are under-followed and possibly undervalued.
There are several lists of foreign dividend growth stocks that can be used in your research.
The NASDAQ International Dividend Achievers Index is comprised of non-US incorporated securities with at least five consecutive years of increasing annual regular dividend payments. I was able to obtain the complete list of holdings as of August 31, 2018. There are over 300 international dividend growth stocks in that list, from many different countries. This is the most comprehensive list of international dividend growth stocks I have seen. You can download the list from here:
There is an ETF that tracks the index, which is from Vanguard (VIGI). You can also download a list of all holdings from this google document.
There are few other sites, which focused on the international dividend growth stocks. These lists provide a lot of information on those securities, including annual dividend increases, dividend history and valuation.
- There is a list focusing on Canadian Dividend Growth Stocks, which is updated from the site DG&I
- There is a list of UK Dividend Champions, updated monthly.
After going through some of the lists outlined here however, I saw quite a few companies that I have never heard of before.
Just as I mentioned in a previous article, there are some risks to consider with international companies. Notably, their dividends are paid in foreign currencies, which means that the dividend income in US dollars will fluctuate in the short term.
In addition, those dividends may be subject to withholding taxes at the source, which may result in extra paperwork for you each year. This means that you should be careful before placing foreign stocks in retirement accounts, because your dividends can be taxed. The exceptions include British and Canadian stocks.
Another thing to consider includes the fact that many of the foreign dividend stocks I have considered and owned in the past have tended to be global multinationals with operations around the world.
Of course, the most challenging factor in researching international companies involves the difficulties in finding information in different languages and even accessing international stock markets directly, which could be costlier. International companies are not as accessible for research like the US companies. I find that owning US stocks is better in those situations, since most dividend growth stocks I focus on already have vast global operations.
Relevant Articles:
- Is international exposure overrated?
- International Dividend Stocks – Pros and Cons
- A Costly Misconception about foreign dividend stocks
- Best International Dividend Stocks
