The Best Countries For Reliable High Yields
In 2014, Forbes ranked Sergey Brin as the 18th-richest person in the world. The Google co-founder is worth an estimated $29.7 billion.
In 1979, Brin’s family left the Soviet Union because of religious persecution and immigrated to the United States. Soon, he would attend Stanford University, meet Larry Page, begin working on search engine algorithms… and the rest is history.
Today, in the dawn of the 21st century, it’s worth asking: will the United States be the destination for the next Sergey Brin?
#-ad_banner-#This is important. Politically stable countries have a history of attracting the best talent and the most capital. It’s the difference between countries that lead the pack — and those that are seemingly always struggling to keep up.
And for investors, politically stable countries have a demonstrated history of beating the market.
The Fund for Peace is a federally-funded research institution dedicated to assessing global political risk. In 2005, it began publishing “The Fragile State Index.” The index uses 12 social, political and economic factors to rank 178 countries based on political stability.
According to its 2014 update, Austria, Australia, the United Kingdom, Canada and Ireland are just a few of the countries that rank ahead of the United States in political stability. (The United States ranks 20th.)
Whether you agree with the U.S.’s standing or not, it’s worth taking a look at some of the other countries on this list to see if there are appealing targets for investors.
My research team and I did just that in a recent issue of my premium newsletter, High-Yield International. In fact, we’ve created a piece of research you won’t find anywhere else.
It’s called the High-Yield International Politically Stable Stock Index.
We started by looking at the stock market performance of the 20 most politically stable countries in the world. But we took the analysis a step further. If you look deeper into the financial metrics of the countries — things like GDP growth, GDP per capita and debt-to-GDP — a handful of nations rise to the top.
So we whittled the original list of 20 politically stable countries down to just five.
As you can see in the chart below, the stock indices of these five countries have crushed their international benchmarks. In the last 10 years, this five-country index has returned 109% compared with 48% for the MSCI World Index (ex-US).
Today, I want to share what I consider to be the five best countries for international investors, especially for those looking for more income. My High-Yield International subscribers and I have exposure to each of them.
The United States’ northern neighbor has been thriving on its booming energy sector — Canada is home to the world’s third-largest proved oil reserves. Despite recent weakness in the price of oil, the International Monetary Fund is projecting Canada’s economy to expand 2.3% in 2015, in line with the growth projections for global developed economies.
Canada is well represented in the High-Yield International portfolio. Some of my best dividend payers are located in there, including one stock currently sporting a 6.3% yield and another sporting an 8.6% yield.
The growth of Australia’s mining and resource industry has sent its GDP per capita soaring, clocking in at $67,400 in 2013 — one of the highest in the world. Natural resources have funded Australia’s budget, making it one of the least-indebted countries in the world.
I’ve already targeted Australia with Westpac Banking Corporation (NYSE: WBK) and its 6.5% yield. But moving forward, I’ll be placing a renewed emphasis on the land down under.
Singapore has attracted businesses with its low corporate tax rate — which averages between 20% and 25% (compared with 39.1% in the United States). Singapore is serious about attracting productive companies and citizens. And that is good for political stability.
The country’s GDP per capita in 2013 came in at $55,000 — ahead of the United States’ $53,000. The IMF is projecting Singapore’s economy to grow 3.5% in 2015. Singapore is a little debt heavy — however, strong economic growth will help keep its deficit and debt load in check. My portfolio already holds one company headquartered in Singapore, currently yielding 5.1%. With strong political stability and a solid economic outlook, I’ll be looking to Singapore for more portfolio additions.
Norway is the fourth most politically stable country in the world, according to the Fragile State Index. That stability is largely driven by the country’s chart-topping GDP per capita rating, clocking in at $101,000. That national wealth is largely driven by Norway’s control of energy resources in the North Sea. Despite the roughly 50% drop in oil prices, the IMF is still projecting Norway’s economy to grow 2% in 2015. Long term, the country’s energy assets are a source of national wealth and security.
Financially, Norway is one of the rare countries in the world with little debt. Once again, thanks to oil.
Norway’s political stability is well represented in my portfolio, with two holdings (an energy major and farm fishery) — both offering outstanding yields.
5) United Kingdom
The United Kingdom is ranked the 17th most politically stable country in the world. That ranking is built upon the UK’s strong legal system and low crime rates. The close U.S. ally had a GDP per capita of $42,000 in 2013 — ranking among the top 20 in the world. The UK is also the global banking capital of the world, ranks in the top 15 in economic freedom and is home to some of the highest-yielding, most reliable dividends in the world.
My High-Yield International portfolio already owns some of the best dividend stocks in the UK, including BP (NYSE: BP) and GlaxoSmithKline (NYSE: GSK).
It’s Time To Look Abroad For Higher Yields
From vast supplies of natural resources to low corporate taxes to strong legal systems (and low crime rates), it’s no wonder that these are some of the best countries to invest in for income.
By looking at the portfolio holdings in my newsletter, High-Yield International, the value of these nations becomes even clearer. I currently own three Canadian securities, five from the United Kingdom, two from Norway and Australia and one in Singapore.
I already have a healthy allocation to companies from these countries — and we’re getting rewarded for it in the form of some fantastic yields. But I think we’ve got room for more.
The bottom line is the world can be a scary, tumultuous place, but that shouldn’t stop you from adding international exposure to your portfolio. Look to the five countries above for safety and income in an unsafe world.
I’ve already shared a few names and ticker symbols with you today, but I’ve saved the absolute best for subscribers to my newsletter. If you’d like to access more of my picks, or simply learn more about earning high yields from across the globe, then I invite you to visit this link.