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Private Briefingwith WILLIAM PATALON III, Executive Editor
Aside from the continued sell-off in U.S. tech stocks, one of yesterday’s top financial news stories was the fact that U.S. inflation is accelerating – and at a pace that’s exceeding forecasts.
And the surge in food prices is one of the big catalysts…
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As most income investors know, the Bush-era dividend tax reduction is among the old tax cuts that could become a new increase if we "fall off" the fiscal cliff.
This uncertainty is one reason stocks have slumped since Election Day. Predictably, investors are fearful companies will be less inclined to pay new dividends or raise existing payouts if the dividend tax rate jumps.
As it pertains to U.S. stocks, there is at least one bright spot, that being the average payout ratio of U.S. dividend-paying firms is just 30%. That is well below the rates of 50% or higher seen in the 1950s through the 1970s.
The even better news for dividend seekers is the fiscal cliff can be dodged to some extent by establishing a bias toward international dividend stocks. Remember, the fiscal cliff is a U.S. phenomenon and many international companies have diverse, global shareholder bases.
In other words, just because a U.S. telecommunications stock is suffering due to fiscal cliff fears, it does not mean a European or Latin American equivalent will be treated the same way.
Consider these international dividend plays before letting fiscal cliff fears get the better of your investing emotions.
The WisdomTree Europe Hedged Equity Fund (NYSE: HEDJ) is a new twist on an old exchange-traded fund (ETF).
Previously, the fund was heavily exposed to international financial services stocks, and featured stocks from multiple regions. These days, HEDJ is light on financials (less than 8% of the fund's weight) and focuses solely on Europe-based dividend equities.
Alone, exposure to Europe might imply a high degree of risk with HEDJ - but that is not the case because the ETF features a couple of unique twists.
First, HEDJ's index is designed to be a hedge against euro weakness, meaning this a fine ETF to be involved with when the U.S. dollar is rising against the controversial common currency.
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