Get Rich with Dividends, 2nd Edition

CHAPTER 11 Foreign Stocks

Some dividend payers, particularly in emerging markets, can offer very attractive yields, especially in comparison to their American counterparts.

In late 2011, while quality American companies were trading with yields around 3% to 4%, many emerging market and beaten-up European equities were paying double those yields. By late 2014, many of those high-yielding European and emerging market yields have dropped to be closer to their American counterparts.

Again, it's important to remember that Wall Street doesn't just give money away. Two equal stocks will not pay dividend yields that are so wide apart that one will be one and a half to twice that of its peer.

If company A is paying a yield of 7% and company B is paying 3.5%, it's because company A is riskier or Wall Street believes it's riskier. Great investors make lots of money when they can identify those companies that are mispriced because Wall Street is mistakenly scared of a stock or underestimated its performance.

The same is true when it comes to dividend yields. You'll want to find those companies whose yields are high compared to similar American companies because the Street has mispriced the stock.

But it is very important to realize that the higher yield typically involves higher risk. It doesn't mean you shouldn't take that risk, but you definitely need to be aware of it.

One Lump or Two?

Wall Street analysts have their own language. They say things like “Can you give some more granularity ...