Investing in Dividend-Yielding ADRs: Tapping Opportunities in Foreign Markets    Bookmark and Share

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.

Most Widely Held American Depositary Receipts Table

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.


Highest Yielding ADRs Table

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.


Small Cap Dividend-Paying ADRs Table

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
VALE
P/E ratio of VALE on Google Finance
US91912E1055 6.91   0.0 -1.1 1.23 Oct 17 2014 -114 17.80
CIA SIDERURGICA NACIONAL
P/E ratio of CIA SIDERURGICA NACIONAL on Google Finance
US20440W1053 1.50   7.2 0.2 0.20 Jan 08 2015 88 13.35
BANCO SANTANDER
P/E ratio of BANCO SANTANDER on Google Finance
US05964H1059 6.69   13.4 0.5 0.76 Oct 15 2014 148 11.30
TELECOM ARGENTINA
P/E ratio of TELECOM ARGENTINA on Google Finance
US8792732096 19.06   9.2 211.0 1.55 Sep 17 2014 1 8.13
CPFL ENERGIA S.A.
P/E ratio of CPFL ENERGIA S.A. on Google Finance
US1261531057 12.51   22.6 0.6 0.87 Sep 05 2014 148 6.98
BANCO BILBAO VIZCAYA ARGENTARIA
P/E ratio of BANCO BILBAO VIZCAYA ARGENTARIA on Google Finance
US05946K1016 8.52   484.3 0.0 0.54 Dec 17 2014 3017 6.37
BP
P/E ratio of BP on Google Finance
US0556221044 38.83   13.0 3.0 2.40 Nov 05 2014 81 6.18
ROYAL DUTCH SHELL A
P/E ratio of ROYAL DUTCH SHELL A on Google Finance
US7802592060 61.45   12.2 5.1 3.76 Nov 12 2014 74 6.12
ROYAL DUTCH SHELL B
P/E ratio of ROYAL DUTCH SHELL B on Google Finance
US7802591070 63.99   0.0 0.0 3.76 Nov 12 2014 5.88
TELEFONICA
P/E ratio of TELEFONICA on Google Finance
US8793822086 14.91   13.9 1.1 0.88 Nov 17 2014 80 5.87
TOTAL
P/E ratio of TOTAL on Google Finance
FR0000120271 51.51   9.7 5.3 2.69 Dec 10 2014 51 5.22
VODAFONE GROUP
P/E ratio of VODAFONE GROUP on Google Finance
US92857W2098 35.13   67.8 0.5 1.82 Nov 20 2014 343 5.18
TIM PARTICIPACOES
P/E ratio of TIM PARTICIPACOES on Google Finance
US88706P1066 22.07   18.8 1.2 1.09 May 13 2014 89 4.94
STMICROELECTRONICS
P/E ratio of STMICROELECTRONICS on Google Finance
US8610121027 8.30   58.1 0.1 0.40 Dec 15 2014 276 4.82
E-HOUSE CHINA
P/E ratio of E-HOUSE CHINA on Google Finance
US26852W1036 6.87   0.0 0.0 0.20 Dec 01 2014 2.91
SINOPEC SHANGHAI PETROCHEMICAL
P/E ratio of SINOPEC SHANGHAI PETROCHEMICAL on Google Finance
US82935M1099 28.53   33.3 85.5 0.80 Jun 26 2014 1 2.82
DAIMLER
P/E ratio of DAIMLER on Google Finance
DE0007100000 90.11   11.5 7.9 2.30 Apr 10 2014 29 2.55
TEVA PHARMACEUTICAL
P/E ratio of TEVA PHARMACEUTICAL on Google Finance
US8816242098 56.86   17.9 3.2 1.35 Nov 13 2014 42 2.37
TAIWAN SEMICONDUCTOR MANUFACTURING
P/E ratio of TAIWAN SEMICONDUCTOR MANUFACTURING on Google Finance
US8740391003 22.71   19.4 1.2 0.40 Jul 14 2014 33 1.76
AMERICA MOVIL SAB DE CV
P/E ratio of AMERICA MOVIL SAB DE CV on Google Finance
US02364W1053 21.39   16.2 135.0 0.36 Nov 10 2014 0 1.69
NOKIA OYJ
P/E ratio of NOKIA OYJ on Google Finance
US6549022043 7.60   63.4 0.1 0.11 Jun 19 2014 91 1.47
ASM INTERNATIONAL
P/E ratio of ASM INTERNATIONAL on Google Finance
USN070451026 41.80   0.0 -3.9 0.58 May 22 2014 -15 1.39
TERNIUM
P/E ratio of TERNIUM on Google Finance
US8808901081 17.14   6.3 2.6 0.08 May 09 2014 3 0.44
UNITED MICROELECTRONICS
P/E ratio of UNITED MICROELECTRONICS on Google Finance
US9108734057 2.38   24.2 0.1 0.00 Jul 07 2014 1 0.05
GRUPO AEROPORTUARIO SUR
P/E ratio of GRUPO AEROPORTUARIO SUR on Google Finance
US40051E2028 130.91   24.8 5.4 0.00 May 09 2013 0 0.00
PETROLEO BRASILEIRO
P/E ratio of PETROLEO BRASILEIRO on Google Finance
US71654V4086 6.01   4.8 1.3 0.00 Mar 20 2012 0 0.00
UBS
P/E ratio of UBS on Google Finance
CH0024899483 16.68   0.0 0.0 0.00 0.00
VEOLIA ENVIRONNEMENT
P/E ratio of VEOLIA ENVIRONNEMENT on Google Finance
US92334N1037 0.00   0.0 0.0 0.00 0.00


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