Money Fund Investors Are Looking Abroad for Dividends

"The U.S. is an actively hostile dividend market and has been for years," says Daniel Peris, senior portfolio manager at Federated Investors. He helps run the Federated International Strategic Value Dividend fund (IVFAX), among others. In the U.S., companies often use their cash to buy back stock instead of paying dividends. But in other developed markets, Peris says there's a strong assumption that companies will pay out much or most of their earnings to shareholders as dividends.

Consider HSBC Holdings, the largest company by market value in the United Kingdom. The financial giant paid out 58 percent of its earnings per share last year in the form of dividends. In the U.S., companies in the Standard & Poor's 500 index paid about 35 percent of their earnings as dividends. That's more than they paid just a few years ago, but it's down from earlier decades. The yields are also higher abroad. U.K. stocks have an average dividend yield of 3.3 percent, and stocks in Europe outside the U.K. offer 3.1 percent, according to MSCI indexes. Stocks from emerging markets, such as Brazil and China, pay 2.7 percent. All are ahead of the 2 percent yield of U.S. stocks.

Source: ABC News

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