We recently compiled a list of 12 Best International Dividend Stocks to Buy Now. Since Linde plc (NYSE:LIN) tops our 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).
1. Linde plc (NYSE:LIN)
Number of Hedge Fund Holders: 65
Linde plc (NYSE:LIN) ranks first on our list of the best dividend stocks from the international markets. The multinational industrial gases and engineering company holds a 29-year track record of consistent dividend growth. It currently pays a quarterly dividend of $1.39 per share and supports a dividend yield of 1.29%, as recorded on June 3.
Linde plc (NYSE:LIN)’s products are crucial to a wide range of industries such as chemicals, electronics, healthcare, energy, metals, and others. This diversity in its customer base enables the company to reduce the risks linked to a decline in any single industry. In the first quarter of 2024, the company’s revenue declined slightly by 1% to $8.1 billion. However, its operating profit of $2.1 billion showed a 6% growth from the same period last year. Moreover, the operating profit margin of 26% is also up 200 basis points. This shows that the company is managing its core operations efficiently and is effectively maintaining costs and expenses relative to its revenue. Linde plc (NYSE:LIN) mainly benefits from the lack of new significant competition in the market, making it unique in its field. Its close industrial gas competitor, Air Products and Chemicals, Inc. (NYSE:APD), has a market cap of over $60 billion, compared with Linde’s market cap of over $207 billion. In addition, LIN is generating more cash than APD, which is highly valued by dividend investors. In the most recent quarter, the company’s operating cash flow grew by 2% on a year-over-year basis at $2 billion. It returned approximately $1.7 billion to shareholders through dividends and share repurchases. The company’s free cash flow for the period came in at $906 million.
Linde plc (NYSE:LIN) has a forward P/E of 27.8, which may seem a little higher. However, given its strong earnings and growth prospects, this valuation could be justified. Moreover, the company is actively pursuing growth opportunities in the hydrogen sector that could significantly boost its revenue. The company’s earnings and returns have always been steady but took a turning point following its merger with Praxair back in 2018. This merger resulted in the combined entity generating $30 billion in annual revenues. Moreover, the stock has returned over 150% since 2018, outperforming the broader market.
Linde plc (NYSE:LIN) was included in 65 hedge fund portfolios at the end of Q1 2024, down from 74 in the previous quarter, according to our database. The stakes owned by these hedge funds have a consolidated value of nearly $4 billion.
Overall, LIN ranks 1st 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.