Dividend expert's four favorite ADRs
Dividend reinvestment advisor highlights four favorite ADRS: Novo Nordisk, ARM Holdings, America Movil and China Mobile.
Because of the risks inherent with investing overseas, investors interested in dividend reinvestment programs need to be particular when venturing abroad.
To make it easier for you to identify quality ADRs, I have highlighted some of my favorite ADR investments, including ideas in healthcare, technology and telecom.
Novo Nordisk (NVO), the Denmark-based provider of diabetes treatments, has been a long-time favorite. The stock has been quite rewarding for shareholders, as these shares have risen more than six fold since 2000.
Diabetes is a major global health problem, so demand for Novo Nordisk’s products should continue to grow.
The stock is rarely cheap, but these shares usually provide a decent entry point for patient investors. I would have no problem buying the stock now and accumulating more shares on weakness.
One of the more interesting growth stories among the ADRs is ARM Holdings (ARMH), a United Kingdom-based company.
ARM’s business model involves the designing and licensing of semiconductor intellectual property (IP) rather than the manufacturing and selling of actual semiconductor chips.
The ﬁrm licenses IP to a network of companies that utilize ARM designs to create and manufacture system-on-chip designs, paying ARM a license fee for the original IP and a royalty on every chip or wafer produced.
Over 15 billion ARM-based chips have been shipped to date. ARM technology is used in more than 95% of the world’s mobile handsets and over one-quarter of all electronic devices.
Proﬁts have been rising for the ﬁrm. Per-share proﬁts should jump around 16% in 2011 and more than 20% in 2012.
These shares have been a favorite of technology investors, which is evident from the stock’s lofty P-E ratio of 52 times 2011 earnings estimate.
Thus, the stock is vulnerable to a downturn in the overall market and the tech sector in particular.
Still, the company has its tentacles into some of the most exciting growth markets in the tech sector and represents an intriguing play for more aggressive investors looking for foreign tech exposure.
The telecom sector represents an interesting area for overseas investment. Two attractive stocks are America Movil (AMX) and China Mobile (CHL).
America Movil, based in Mexico, is a leading provider of wireless services in Latin America. The ﬁrm is broadening its business with the acquisition of the remaining 40% interest it does not already own in Telefonos de Mexico, a wireline provider of telecom services.
China Mobile, with 627 million customers, is the world’s largest provider of mobile telecom services.
Both ﬁrms should experience above-average growth. Both also offer nice cash ﬂow in the way of dividends. China Mobile’s yield of 4% is especially attractive.
Dividend investors who are looking to diversify a dividend portfolio with foreign investments should consider these stocks.
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