We recently compiled a list of 12 Best International Dividend Stocks to Buy Now. Since British American Tobacco p.l.c. (NYSE:BTI) is part of the list, we have analyzed the stock in detail.
As we move toward the second half of 2024, investors are eagerly preparing for the direction that the stock market will take for the remainder of the year. The first quarter of 2024 marked the broader market’s strongest performance for the first quarter since 2019. However, the question remains whether this trend will persist throughout the year. With geopolitical tensions, high interest rates, and higher prices, investors are looking for ways to diversify their portfolios. In this regard, international stocks, which usually fly under the radar, are the most favorable option to explore. And they become even more appealing when they pay dividends.
Dividend stocks are the bread and butter of a diversified portfolio. They have represented nearly 34% of the market’s overall return from 1940 to 2023, with even better performance during periods of high inflation. American companies are mainly known for paying dividends, but foreign counterparts are not far behind in this regard. Expanding your portfolio globally could help you avoid some of the specific challenges faced in the US. For instance, European banks are subject to tighter regulations, resulting in lower levels of interest-rate risk. With a more relaxed regulatory environment, dividends could potentially increase, and buybacks might rise in the international market. In fact, the markets with the highest yields are Norway, Hungary, Romania, and Iceland.
In 2023, Europe played a significant role in driving growth, with record dividend payouts growing by 10.4% compared to the previous year on an underlying basis, according to a report by Janus Henderson. The report further mentioned that annual dividends for the region grew from nearly $169 billion in 2020 to $301 billion in 2023. The trend is expected to continue this year as well as corporate leaders, especially in Europe and Japan, appear to be striking a balance between investing in capital expenditures and meeting operating cash flow requirements, while also showing an inclination to return cash to shareholders through dividends. According to FactSet data, European dividends per share are expected to grow at a CAGR of 8.5% by 2025.
There are no certainties in investing, of course. But we have compiled a list of some of the best dividend stocks from the international market to offer exposure to our readers.
Our Methodology:
For this list, we initially used a stock screener to identify foreign (non-U.S.) dividend stocks that are traded on US stock exchanges. Subsequently, from this dataset, we selected 12 stocks that boasted the highest number of hedge fund investors from Insider Monkey’s database of Q1 2024. The stocks presented in the article were then arranged in ascending order based on the count of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
British American Tobacco p.l.c. (NYSE:BTI)
Number of Hedge Fund Holders: 19
British American Tobacco p.l.c. (NYSE:BTI) is a British company that specializes in the manufacturing of cigarettes, tobacco, and other related nicotine products. The company currently pays a quarterly dividend of $0.7431 per share, growing it by over 6% in February this year. The stock has a dividend yield of 9.42%, as of June 3. It is one of the best dividend stocks to buy from the international market.
British American Tobacco p.l.c. (NYSE:BTI) benefits from its industry’s resilience, as the tobacco sector remained stable during the pandemic while other industries experienced downturns. That said, the industry now faces challenges due to declining smoking rates and strict regulations. Given these current setbacks, BTI is all set to introduce ‘reduced risk products’, such as vaping, as alternatives to traditional tobacco. The company trades at a P/E multiple of 7x, which shows that it is relatively cheap based on its strong earnings growth potential and competitive position in the market. However, does the stock’s valuation support its viability as a strong investment option? Broyhill Asset Management spoke about this in its Q4 2023 investor letter:
“The largest detractors to performance over the quarter were LatAm airports (ASR, OMAB, PAC), Bayer, and British American Tobacco p.l.c. (NYSE:BTI). After years investing across the tobacco sector, it became increasingly clear that owning anything other than the global leader – Philip Morris – made little sense. Consequently, we liquidated our investment in British American Tobacco after deciding that the (seemingly) cheap valuation wasn’t worth the mental anguish. In a hollow victory, shortly after our sale, management promptly wrote down the value of its US tobacco brands by $31.5 billion, sending shares cratering.”
British American Tobacco p.l.c. (NYSE:BTI)’s stock has appreciated by 4.13% so far this year. As of the close of Q1 2024, 19 hedge funds in Insider Monkey’s database held stakes in the company, down from 22 in the preceding quarter. These stakes are worth over $588.6 million in total. Ken Griffin was bullish on the stock as his hedge fund, Citadel Investment Group, increased its position in the company by 464% during the quarter.
Overall, BTI ranks 11th among the best international dividend stocks. You can visit 12 Best International Dividend Stocks to Buy Now to see other dividend stocks from the international market. While we acknowledge the potential of dividend stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
