Dollar's rebound is an opportunity.
Strong corporate profits and hopes of resolution in the global trade disputes have resulted in a stronger U.S. dollar. So what does that mean for your stocks? Well, a stronger dollar means U.S. exports are more expensive overseas and foreign stocks that sell goods to America book higher profits thanks to favorable exchange rates. Simply put, there is a modest tailwind for companies that are located outside the U.S. when the greenback is strong. If you're an income investor, you may want to consider these international picks as a hedge against domestic pressures and a way to tap into global income opportunities. All of these stocks boast market capitalizations north of $10 billion and pay a dividend yield of 3% or better.
ABB Ltd. (ticker: ABB)
Swiss machinery giant ABB is a leader in electrical equipment and industrial automation technologies. The firm may not be a household name, but has been a member of the 500 largest global corporations as measured by revenue for more than two decades. While typically dependent on big capital spending at manufacturers, ABB is relatively insulated from the ups and downs of the broader economy thanks to long-term service contracts around the world -- as well as the consistent push for industrial automation. The result is a regular flow of cash that supports generous and sustainable dividends, which are paid once a year in a lump sum.
Current yield: 3.8%
Seagate Technology (STX)
Disk drive manufacturer Seagate isn't the most interesting investment on the planet, as the Ireland-based firm remains reliant on old-school "solid state" disk drives like those in laptops and desktop computers. However, after industry consolidation and right-sizing to meet demand trends, STX has seen revenues stabilize and profits edge modestly higher lately. Share prices have been very stable after a mid-2016 rebound, and the firm just announced a modest dividend increase to prove it remains committed to returning capital back to its stockholders.
Current yield: 4.3%
Rio Tinto (RIO)
Though it only pays its dividends twice a year, U.K.-based Rio Tinto is one of the more generous stocks on this list -- and as one of the world's largest materials providers with a rich history of about 150 years, this $90 billion corporation has a wide moat and stable future. A global mining powerhouse, RIO extracts a host of metals from aluminum to copper to gold to iron ore. Establishing and operating mines on that scale simply isn't possible for other companies, and the diversity of ores and customers helps smooth out performance in the long term even if individual metals rise or fall based on economic trends.
Current yield: 5.8%
Eaton Corp. (ETN)
Ireland-headquartered Eaton is an industrial stock that offers power and lighting solutions to customers worldwide. It's not as sexy as making smartphones, but ETN does a brisk business selling circuits and valves and other equipment to end users who are concerned about managing reliable power sources for their operations. Particularly in an era where climate change is a focus, ETN is increasingly important as a way to boost efficiency -- and save money. From airports to hospitals and data centers, Eaton makes sure these organizations remain plugged in. And, these reliable customers keep a steady flow of cash coming into its coffers and into shareholders' pockets via dividends.
Current yield: 3.3%
Colombia's state-run oil outfit, Ecopetrol has been choppy but fairly range bound for the last two years as the nation has struggled along with its neighbors Venezuela and Brazil. However, stabilizing oil prices coupled with a brighter outlook lately has provided a bit of a tailwind for this energy stock. And bigger picture, you're hard-pressed to find a firm that is more stable than a state-run energy pick. Sure, profits may wax and wane a bit based on the price of oil, but government backing ensures the company will operate no matter what -- and the need for income into state coffers results in a mandate for consistent and generous dividends over the long term.
Current yield: 5.3%
LyondellBasell Industries (LYB)
LyondellBasell isn't exactly a household name, but it is the third-largest independent chemical manufacturer in the world. Headquartered in London, LYB mostly creates plastics and polymers, including the popular compound polypropylene that's used in food containers, medicine bottles and even baby diapers. The wide variety of uses for LYB polymers means a diverse group of customers that can support consistent cash flow. That's the hallmark of a good dividend stock. With a $30 billion market value and global operations, LyondellBasell is a well-connected and low-risk raw materials stock that is worth considering in any portfolio -- particularly for investors looking at geographical and local currency diversification.
Current yield: 4.7%
Just as entrenched domestic telecommunications stocks have characteristics that make them some of the most popular income investments, TEF is worth a look because of the same features. This Spain-based company has millions of landline and wireless customers around the globe, both in Europe as well as in growing Latin American markets including Argentina, Brazil and Chile. Founded almost a century ago and with a market value of about $40 billion, this stock has many of the same factors that make more familiar U.S. telecom picks appealing -- with a global presence to boot.
Current yield: 5.9%
European heath care giant Novartis is one of the leading providers of treatments for autoimmune and inflammatory conditions that include multiple sclerosis and psoriasis. These chronic ailments demand regular medication for any patient that wants to maintain a decent quality of life, and that adds up to reliable revenue for NVS based on its very impressive drug portfolio. In many ways Novartis is just as good as Dow Jones Industrial Average components Merck & Co. (MRK) and Pfizer (PFE) thanks to a whopping $200 billion market cap and its blockbuster drugs. The only difference is it books revenue in foreign currency, which could help your portfolio when exchange rates are favorable.
Current yield: 3.3%
Foreign income stocks to buy for a strong dollar:
-- ABB Ltd. (ABB)
-- Seagate Technology (STX)
-- Rio Tinto (RIO)
-- Eaton Corp. (ETN)
-- Ecopetrol (EC)
-- LyondellBasell Industries (LYB)
-- Telefonica (TEF)
-- Novartis (NVS)
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