What are we looking for?
Large cap, global dividend payers.
The screen
As a volatile year for global markets nears its end, investors have a chance to examine where market returns have been generated.
Positive returns have been elusive, but there has actually been strength in some markets. Year to date to the close on Dec. 11, the three top major indexes have been from Milan, Tokyo and Shanghai, with local currency total returns of 13.6 per cent, 12 per cent and 10.2 per cent, respectively.
Taking a simplified approach to diversifying outside of North America, Lawrence Ullman and I turned to Bloomberg to select large capitalization, dividend-paying companies from around the world. For accessibility, we looked for the 20 largest international firms by market cap in U.S. dollars, using ADRs (American depositary receipts) listed in the United States. All firms were screened to have a dividend yield greater than 2 per cent.
More about the Ullman Group
The Ullman Group is an independent provider of strategic private capital management services to high-net-worth individuals, corporations, endowments, charities and foundations.
What we found
We used Bloomberg to perform a back-test starting Nov. 30, 2000, selecting an equally-weighted portfolio of the largest 20 companies. The portfolio would be reselected and rebalanced annually.
Over the full period, this strategy would have generated an annualized total return of 9.5 per cent compared with 4.9 per cent for the MSCI World Index. More recently, this approach has been underperforming the broad index but it experienced significant success from 2000 to 2007, outperforming in all years.
The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Ltd. or its affiliates. Investors should contact a professional or do their own research before investing in any of the stocks shown here.
Craig McGee, CFA, is a portfolio manager and Lawrence Ullman, MBA, is a director, wealth management and portfolio manager with the Ullman Group at Richardson GMP in Toronto.
Richardson GMP Limited is a member of Canadian Investor Protection Fund. Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.