Opportunities abroad

Question: How do U.S. and international dividend payers compare?

Deborah Bickerstaff: It is a really interesting time to take a look at international dividend investing. We do see a complete opposite performance pattern happening abroad versus what we're experiencing here in the U.S. Part of that, frankly, is because we've come through really a lost decade for international investing. If you look at the last 10 years, I would suggest up to last September, the only return the international marketplace could really produce was from the dividend check. Remember, here we did have the financial crisis, but abroad they also had the Eurozone crisis, Brexit, ongoing concerns about China and GDP growth, the Ukraine-Russia conflict, and of course ongoing concerns about China and Taiwan. And that has really kept a lid on the opportunity set abroad. But what we've seen here in 2023, if we go back and assess that S&P 500 without the Magnificent Seven, the return for the market would've been here in the U.S. roughly 6%. But if we look at the MSCI World ex U.S., it has put up a 10% total return year-to-date. And why is that? Well, frankly, it's a very different market construct when you look abroad. Here in the U.S., I think the U.S. marketplace has a technology problem. A lot of technology. Again, when you look at the S&P 500 and the Mag Seven, that's 40% of the benchmark. But if you look at the international benchmarks, you're talking just 7, 8% technology. So where we have this very narrow market leadership here in the U.S., what we've seen abroad has been a broadening of performance, more diversified performance. And I think that is really being looked upon as an excellent opportunity going forward. Remember, it's been 10 years of nothing, but regardless, if you are the dividend collector, you have that natural opportunity in the international space. In the international marketplace, frankly, companies are more committed to a progressive generous dividend policy for the owners of the company. They operate with higher payout ratios than what we see here in the U.S. So in the U.S. our payout ratios typically 30 to 35%, hence our very scant yield on our market. But abroad, payout ratios tend to be 50% or better, which leads to higher dividend yields abroad.