Follow Us
Become a Fan
Earn Big Dividends in Little Companies
My grandfather was a hardworking tire salesman for a local department store. Up every morning before dawn, down every night not long after the sun found its way to the western horizon. Although I didn’t register this at the time, I knew I wanted no life that resembled his. I wanted something … different.
As a tire salesman, he earned very little. Never was he able to give my grandmother the life she wanted. Growing up with my grandparents I saw all of this play out in various ways.
As a kid, of course, I never connected the dots or understood the context. But as a college student looking ahead to the rest of my life, I reflexively knew my goals required that I do something different than what I saw my grandfather doing all those years.
My grandfather never put any of his money to work. Ever. Never invested a dime. Didn’t participate in the investment plan available to him at work, my grandmother once told me by way of a complaint. Retired just weeks before he was eligible for a pension, despite the deleterious effects it would have on his and my grandmother’s living standards in retirement.
The limitations that resulted – well, that wasn’t for me.
So, I set about early in my career to put my money to work because, as I’ve written before, my grandmother (who did put $25 a month in her company’s stock purchase plan) taught me that money at work was always better than man at work.
It was a very profound piece of wisdom.
What better way to put money to work than have it earn dividends for you while the company you own grows? And what better dividend-paying companies to own than those that are still small and have many years of expansion still remaining?
It’s the perfect two-fer deal … you get consistent, quarterly income falling into your brokerage account that you can use to buy more shares of stock, and you get the growth over time in the stock’s price as your small company grows larger and larger through the years.
But then I found a way to make it even better …
Where to Find Small-Cap Dividend Payers
I still remember the night in 1994 when I was reading Jim Roger’s Investment Biker and it dawned on me: You really want to make your money work double duty – put it to work in small, dividend-paying companies overseas!
I’d traveled the world with my mom as a kid (she worked for a string of international airlines; we flew free), and I knew from my experiences that people the world over want exactly the same things we want in America. Only, they spend their money on local companies.
Most American investors, of course, don’t pay attention to that opportunity.
They don’t realize that right now millions of people in Thailand have popped into the local version of 7-Eleven or Circle K for soft drink. Or that millions of Britons are sitting down to a meal in a pub. Or that millions of Indians are booking business flights and vacations on one of the local discount airlines. Or that millions of Middle Easterners are shopping for a new stove or dishwasher.
Better still, they don’t realize that the companies running the stores or providing those products and services are small and fast growing, that many are publicly traded, and that many pay dividends – often meaningful dividends that far outpace what you find in U.S. small-cap stocks, which typically don’t pay meaningful dividends, assuming they pay dividends at all.
And the best trait – the reason small-cap dividend payers overseas are better than what you find at home – is that those dividends are paid in a foreign currency. As the U.S. dollar continues its multi-year trek lower, the value of your foreign dividends increases in dollar terms. Your money works doubly hard.
One of the top markets to find small-cap dividend payers these days is … Australia.
Earn 5% to 13% … and Get Growth
With brokerage accounts on every habitable continent but South America, I spend a lot of time paying attention to local stock markets – and dividend yield is one of the key measures I watch.
Since I want my money at work in the stocks I own, I routinely go in search of dividend payers – and specifically small-cap dividend payers.
In a world where every number on a balance sheet or income statement can be manipulated through accounting, dividends are proof that some level of earnings is real.
As I write this, I am looking at a list of small, dividend-paying stocks in Australia. I see yields that range between 5% and 13% in industries across a wide spectrum. And they have annualized sales and earnings growth expectations of between 9% and 22% – so these are companies with robust and expanding businesses to support those meaningful dividends.
Just one example: Cabcharge Australia, which provides services to the taxi industry, including electronic fare-payment systems. The stock (ASX: CAB) yields a healthy 6.8% at the moment, and dividends look set to grow nicely.
Better still, those dividends are in Aussie dollars, a currency backed by commodities and which will rise over time against the greenback. So, your money is working double duty.
My grandfather probably wouldn’t care about any of this. But I like to think my grandmother would be proud that I’ve taken her wisdom to heart.
Until next time, keep a global view ….
Jeff D. Opdyke
P.S I suspect you’re as concerned as I am about the state of this so-called economic recovery and the devastating impact it’s having on your retirement plans – whether you’re already retired or you’re still saving for it. Dividend payout is one way to boost your income, but, since the 1980s, big yields in America have virtually disappeared. However, as I’ve been writing about, many overseas companies still pay chunky dividends – far chunkier than anything you’ll find on the S&P 500. This is not about buying shares in fly-by-nights in volatile global markets. It’s about good, old-fashioned blue-chip buy-and-holds. To learn more about these overseas dividend opportunities, click here.
Other Posts from the Author
- How to Get More Income from Your Investments - May 16th, 2012
- What My “Air-Route Indicator” Says About the Next Big Investment - May 11th, 2012
- Profiting from Asia’s Growing Thirst - May 9th, 2012
Interested in More Articles Like This? Sign up for The Sovereign Investor today! (It's FREE!)
