Published Mon, 2 July 2012 10:30 CET by TopYields.nl
Opportunities to earn the most competitive return often exist in foreign markets. The simplest ways for investors to tap those markets is by investing in American Depositary Receipts (ADRs).
Shares of many non-US domiciled companies trade on U.S. listed exchanges and the over-the-counter market through ADRs. ADRs, issued by U.S. depositary banks, are negotiable securities that represent ownership of the securities of a non-U.S. domiciled companies. While securities underlying the ADRs can be debt and money market instruments, in most cases they are equity instruments. These equities of foreign entities represented by ADRs are called American Depositary Shares (ADS). ADRs can represent one or more shares of foreign companies or a fraction of a share. They are denominated in the U.S dollars and pay dividends in the U.S. currency. They are traded like ordinary shares on the official and over-the-counter markets and their prices reflect the price changes in the foreign stock in its home market.
Investors should also be aware of some of the costs and risks associated with owning ADRs. Investors incur costs such as depositary bank fees, deducted from the dividends and other distributions, and foreign exchange fees. Furthermore, access to timely and comprehensive information may be limited, given that foreign companies need not disclose all the information customarily reported by the U.S. listed securities.
Market for ADRs
The BNY Mellon Classic ADR Index consists of 918 ADRs trading on U.S. listed exchanges or over the counter. These ADRs collectively have a market capitalization of $12,454 billion. As of May 31, 2012, BNY Mellon ADR Index returned negative 5%, compared with a positive 2.6% total return for the S&P 500 Index. Some of the most prominent foreign corporate names traded as ADRs include China's Baidu Inc. (Nasdaq: BIDU), Brazil's Vale SA (NYSE: VALE) and Petroleo Brasileiro (Petrobras) (NYSE: PBR) and UK's BP PLC (NYSE: BP). For the list of most widely held ADRs, please consult the table below.
Highest Yielding ADRs
While almost all most-widely held foreign companies traded as ADRs pay attractive dividends, there is a select group of highly liquid, high-yielding dividend payers among ADRs. The list includes the two largest Spanish banks, Banco Santander (NYSE: SAN) and Banco Bilbao Vizcaya Argentaria SA (NYSE: BBVA), French and Spanish telecom operators France Telecom (NYSE: FTE) and Telefonica (NYSE: TEF), chipmakers United Microelectronics Corp. (NYSE: UMC) from Taiwan and STMicroelectronics NV (NYSE: STM) from the Netherlands, and others. The table below summarizes the top-yielding dividend payers by yield.
Small Cap Dividend-Paying ADRs
Income investors can also take advantage of the high growth in the small-cap universe of the foreign companies trading as ADRs. The Bank of New York Mellon Small Cap Select ADR Index tracks the performance of the small-cap ADRs. Investors can invest in select index constituents. Some of the attractive names include Ternium SA (NYSE: TX), a Brazilian steel producer, Grupo Aeroportuario del Sureste, SAB de CV (NYSE: ASR), a company holding concessions to operate, maintain, and develop airports in the southeast region of Mexico, and Telecom Argentina SA (NYSE: TEO), an Argentine telecom operator. Other possible small-cap ADR investment choices are listed in the table below.
A lion's share of the future growth in the world's economic output will come from the developing regions of the world, most notably from the BRIC countries (Brazil, Russia, India, and China). Investors have ample opportunities to capitalize on that growth by investing in ADRs.
Stock symbol(s): AMX,ASMI,ASR,BBVA,BP,CPL,DDAIF,EJ,FTE,IIT,NOK,PBR,RDS-A,RDS-B,SAN,SHI,SID,STM,TEF,TEVA,TEO,TOT,TSM,TSU,TX,UBS,UMC,VALE,...
|Stock name||ISIN||Last trade||P/E||EPS||Div PS||Ex Div Date||Payout Ratio||Div Yield|
|CIA SIDERURGICA NACIONAL||US20440W1053||5.62||21.8||0.3||0.52||Nov 21 2013||204||9.22|
|VALE||US91912E1055||15.33||19.0||0.8||1.13||Oct 18 2013||139||7.37|
|BANCO SANTANDER||US05964H1059||8.64||15.8||0.5||0.64||Oct 10 2013||116||7.36|
|TOTAL||FR0000120271||58.42||10.2||5.7||3.11||Sep 19 2013||54||5.32|
|ROYAL DUTCH SHELL A||US7802592060||68.20||9.0||7.6||3.60||Nov 13 2013||48||5.28|
|STMICROELECTRONICS||US8610121027||7.76||0.0||-1.0||0.40||Dec 09 2013||-40||5.15|
|ROYAL DUTCH SHELL B||US7802591070||71.19||0.0||0.0||3.60||Nov 13 2013||5.06|
|CPFL ENERGIA S.A.||US1261531057||16.10||21.3||0.8||0.80||Aug 23 2013||104||4.95|
|BANCO BILBAO VIZCAYA ARGENTARIA||US05946K1016||11.53||39.2||0.3||0.55||Sep 25 2013||188||4.81|
|BP||US0556221044||46.57||6.3||7.5||2.19||Nov 06 2013||29||4.70|
|VEOLIA ENVIRONNEMENT||US92334N1037||15.45||47.6||0.3||0.65||May 15 2013||201||4.23|
|VODAFONE GROUP||US92857W2098||37.99||6.3||6.0||1.12||Nov 20 2013||19||2.95|
|UNITED MICROELECTRONICS||US9108734057||1.99||0.0||0.0||0.05||Jul 08 2013||2.72|
|TEVA PHARMACEUTICAL||US8816242098||41.03||83.4||0.5||1.08||Nov 18 2013||225||2.63|
|GRUPO AEROPORTUARIO SUR||US40051E2028||133.34||24.5||5.4||3.30||May 09 2013||62||2.47|
|TELEFONICA||US8793822086||15.80||13.2||1.2||0.37||Nov 01 2013||31||2.36|
|TAIWAN SEMICONDUCTOR MANUFACTURING||US8740391003||17.37||14.8||1.2||0.40||Jul 03 2013||34||2.31|
|TERNIUM||US8808901081||28.21||72.2||0.4||0.65||May 03 2013||168||2.30|
|SINOPEC SHANGHAI PETROCHEMICAL||US82935M1099||42.91||191.8||0.2||0.74||Oct 22 2013||334||1.71|
|ASM INTERNATIONAL||USN070451026||32.56||1.1||29.4||0.55||May 20 2013||2||1.68|
|AMERICA MOVIL SAB DE CV||US02364W1053||22.55||14.9||1.5||0.34||Nov 12 2013||23||1.53|
|TIM PARTICIPACOES||US88706P1066||25.65||19.1||1.4||0.38||May 13 2013||28||1.48|
|E-HOUSE CHINA||US26852W1036||13.13||0.0||-0.2||0.15||Apr 08 2013||-77||1.14|
|UBS||CH0024899483||18.79||0.0||-0.7||0.16||May 06 2013||-24||0.86|
|NOKIA OYJ||US6549022043||7.88||0.0||-0.1||0.00||May 04 2012||0||0.00|
|PETROLEO BRASILEIRO||US71654V4086||13.90||6.8||2.0||0.00||Mar 20 2012||0||0.00|
|TELECOM ARGENTINA||US8792732096||18.34||7.8||2.3||0.00||May 08 2012||0||0.00|
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