Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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| An Easy Way to Capitalize on Sizzling Foreign Markets |
Published: October 24, 2006
There has been a lot of press
recently about the major U.S. averages reaching new milestones. The Dow
Jones Industrial Average has been hitting new all-time highs, breaking
past previous records not seen since 2000. Meanwhile, the S&P 500
has been trading at its best levels in more than five years. Although
these are impressive stats, a number of foreign countries have delivered
superior stock market returns over this same time period. In addition,
most developed countries have outstripped U.S. equities by a wide margin
so far this year.
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Compared to the S&P's +9%
gain this year, one of the most popular foreign benchmarks -- the Morgan
Stanley's MSCI Europe, Australasia Far-East Index, or EAFE -- is ahead
over +14% in U.S. dollar terms. And within this index of the developed
world, stocks in the 12-nation Eurozone bloc are leading the charge,
with +20% returns year-to-date.
What's driving these
international stocks to new heights? Economic growth, for starters --
the International Monetary Fund (IMF) forecasts the world economy will
grow +5.1% this year, slowing to a still healthy +4.9% next year.
However, the U.S. economy is expected deliver economic growth of just
+3.4% this year, and that figure should fall to +2.9% in 2007. That's a
marked decline from the +4.2% growth it posted in 2004.
In contrast to the steady downtrend of the U.S. economy, the Eurozone is
in recovery mode. In fact, the 12-nation economic bloc is expanding at
the fastest rate in six years. The European Commission estimates the
economy will rebound sharply from an anemic +1.3% growth rate last year,
and this year will post its fastest growth since 2000.
As the U.S. economy cools, the Fed appears to be nearing the end of its
cycle of interest rate hikes. Meanwhile, central banks in Europe,
Britain, and Japan are still raising their rates. Attracted by these
rising rates, investors are moving capital into foreign assets. As a
result, foreign currencies are continuing to strengthen against the U.S.
dollar. The U.S. Dollar Index, which measures the value of the greenback
against six major world currencies (the euro, Japanese yen, British
pound, Canadian dollar, Swedish krona, and Swiss franc), is down nearly
-5% this year.
The good news for U.S. income investors is that a weaker dollar
translates into stronger returns from overseas investments. For example,
Italian utility Enel (NYSE: EN) is trading at around $45 and provides
around a $4 annual dividend. The share prices and dividends of Italian
stocks are based on the euro. Right now, the euro is worth $1.26. That
means EN's share price is equivalent to about 36 euros and its dividend
equates to about 3 euros.
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Editor's
Note: Carla Pasternak's model portfolios focus exclusively
on investment opportunities with ultra-high yields. In fact, in each
of her monthly High-Yield Investing newsletters she
provides readers with an entire portfolio of stocks, funds and
preferreds that are delivering annual dividend yields of +10% or
more. That's right -- in order to even be considered for
inclusion in this portfolio, an investment
must deliver cash payments of at least 10% per year. Visit
this link to learn more about Carla Pasternak's High-Yield
Investing newsletter.
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Going forward, suppose the
dollar weakens and one euro is now worth $1.45. Since Enel's share price
is based on euros, its value would increase about +15% in U.S. dollars
even without a change in the underlying European share price. EN would
now be worth almost $52 and its annual dividend would jump to $4.60.
Even with their recent gains, foreign stocks are still relatively
cheaper than U.S. equities. According to equity research firm Standard
& Poor's, price-to-earnings ratios for U.S. stocks are +15% higher
than those for international stocks.
One caveat: If the U.S. economy slows, as many economists expect, then
export-driven emerging markets in Asia (such as Korea or Taiwan) and
commodity-based economies (such as Australia and Canada) could be
vulnerable. A U.S. slowdown could also weigh on the recovery that's
happening in Western Europe and Japan. However, these regions tend to
have diverse economies and a strong enough consumer base to sustain
growth even if their exports to the U.S. decline.
Given their high growth potential, income investors may want to
diversify their portfolios by investing in a select group of developed
international markets. The problem is some of the best international
companies, with the greatest growth potential, are those that mostly
serve their home markets and trade on domestic exchanges. These stocks
are not readily available to U.S. investors, except via international
equity funds.
Therefore, one of the best ways for U.S. investors to gain exposure to
dividend-paying international stocks is to invest in closed-end global
equity funds. In the table below, we present a handful of select funds
with yields of 8% or higher that trade right here at home on the NYSE.
Each fund holds a diversified portfolio of stocks from a variety of
developed markets, including Europe and Japan. In addition, we have only
included funds that do not use leverage (borrow money at short-term
rates to reinvest at long-term rates), as this strategy is not well
suited to the current interest rate environment.
Important
Note: Throughout
the remainder of this article, editor Carla Pasternak provides a
detailed look at six closed-end global equity funds that trade on the
NYSE and offer dividend yields of at least 8.0%. However, in order to
view the remainder of this article, you'll need to subscribe to our
premium income-oriented newsletter -- High-Yield Investing. After
you subscribe you'll receive immediate access to this full article, as
well as our monthly High-Yield Investing newsletter and a
host of additional premium content. Please visit one of the following
links to continue...
Good investing!
Carla Pasternak
Editor
High-Yield Investing
http://www.StreetAuthority.com
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receive in-depth guidance on today's leading income investing
opportunities each month, plus access to several model portfolios,
please subscribe to Carla Pasternak's premium newsletter -- High-Yield
Investing. |
Carla
Pasternak draws on a variety of financial backgrounds to make profitable
calls on income-generating stocks for her readers.
Carla has
been employed in the investment industry for more than two decades. In
addition to her work as a writer for several other nationally recognized
financial publishers, her previous experience includes a position as
President of a well-respected investor relations firm. She has also been
writing shareholder reports for public companies (annual reports,
speeches, corporate profiles, slide shows, etc.) since 1980.
A highly
successful investment analyst, Carla specializes in high-yield,
income-paying stocks. In that pursuit, she's always mindful to select
companies that not only pay rich dividends, but that also have the
potential to deliver strong long-term capital gains.
On the
educational front, Carla holds both MBA and Ph.D. degrees. When she's
not watching the market, she's teaching business courses at the college
level and managing several million dollars in portfolio assets.
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