It is time to look at overseas options if you want stocks with good dividends. If you are particular about investing only in the banking sector, U.S. banks would give you at the most around 3% dividend yield. If this is not good enough for you, you can try investing in some international banks. However, Wall Street experts recommend you be very careful while investing in foreign stocks as the returns that they bring are always accompanied by risks in their respective economies. You must be shrewd enough to evaluate the pros and cons of these stocks and choose only those banks whose returns are more than the risks associated with them.
Tapping the potential of emerging markets
One of the best foreign banks to invest in, if you are looking for good dividend yields, is HSBC Bank (HSBC, Financial), based out of Britain. At present, the dividend yield of this bank is 4.3%. It runs its operations in a whopping 74 countries, out of which a large number of countries are present in the Asian continent. This is the place where all the emerging markets are located. While investing in HSBC gives you the option to explore the wealth of opportunities that these markets offer you, you must also be ready to face the risks that are associated in countries like China. One of the major features that might attract you to invest in U.K.’s HSBC bank is that, dividends that are got from this are not taxed in the U.S. Hence you are in for a double whammy – increased returns and no charge on the same. With the emerging markets all set to grow immensely in the coming years, HSBC, too, could witness unprecedented growth if it manages the risks of these economies perfectly. Share prices of the bank for the last few years are seen below:
Diversification of business and a rich legacy
The next international stock that U.S. investors can consider is Royal Bank of Canada (RY, Financial). This bank’s history can be traced back to 1869 and has a diverse nature of businesses in sectors like insurance, stock markets, wealth management and the like. This is one of the oldest banks and is one of the most respected ones with a dividend yield of 3.9%. The only challenge for this bank is the falling prices in the oil sector. However, only close to $7.65 billion or around 2% of the bank’s loans are exposed to the energy sector, which means only a small portfolio faces the music of unfavorable market conditions. One deal through which Royal Bank of Canada is all set to make its presence felt in the U.S. is its acquisition of City National Corporation for a deal worth $5.4 billion. Through this deal, the bank is all poised to get many affluent residents in the U.S. as its clients. If you invest in this bank, you have to pay withholding tax of 15%; however, this will be offset by the credit that you will get for international taxes. The share price history of the bank is given below:
High risks and higher returns
The next international stock that we are going to see is the one that involves large amount of risk but also looks attractive because of the returns that are associated with the same. It is the Industrial and Commercial Bank of China (IDCBY, Financial). Needless to say, this bank is the riskiest of all the stocks mentioned here because of the huge exposure to the Chinese market. With the Chinese economy going through lots of ups and downs, this bank, with a dividend yield of 5.8%, is one that needs to be considered only if you are ready to take a sizeable amount of risk. The withholding tax rate is 10% currently, and there is no provision to eliminate this rate irrespective of the purpose of your investment. The bank’s historic share price trend is seen below:
Conclusion
Investors should understand that international stocks come with a variety of risks. If you are planning to invest in any foreign bank stock, you must first understand its portfolio fully, evaluate its exposure in various economies and then take the call to invest in them, only if the returns that these banks provide, are worth fighting for.
