Five Of The Best International Dividend Stocks Today

The USA represents the biggest Stock Market with some of the best brands in the world with experienced management that can all but guarantee long-term success.

However, sometimes these companies are a bit overvalued – even considering potential growth in the coming years. For this reason, my intention today is to introduce a few international names that may have lower valuations, allowing us to diversify our portfolio risk.

To this end, I would like to introduce the following companies:

  1. Rio Tinto (Australia), the world’s 2nd biggest miner
  2. Saeta Yield (Spain), small bust fast growing solar farms companies
  3. Munich Re (Germany), the world’s biggest reinsurer
  4. Swiss Re (Switzerland), the world’s 2nd biggest reinsurer
  5. Red Electrica, Spanish utility with 17 years of dividend increase and a 5% yield

International Dividend Stock #1:  Rio Tinto (RIO)

Mining companies have been suffering in the last 5-7 years due to the decrease in commodity pricing. They have been deleveraging to reduce costs and risks.

The best in this group is probably Rio Tinto, an 85B USD Australian miner focused in Iron Ore, aluminum and copper, with solid financial position (debt is only 0.6 x EBITDA), large free cash flow and shareholder friendly policies.

Operations

Rio Tinto has numerous competitive advantages:

  • One of the cheapest producer of Iron Ore (around $14/ton),
  • Highest product quality in the market
  • Automated operations (driverless trucks and trains extract and bring minerals to the Australian port of Hedland)
  • 5/6 tier 1 mines with large reserves for the next coming year

Rio Tinto Promises

Source: Rio Tinto 2017H1 presentation

This efficiency allowed Rio Tinto to generate plenty of free cash flow, enough to reduce debt by $2B, $1B of share buyback and $2B dividend for the semester. Moreover, free cash flow is expected to grow even further, thanks to:

  • Iron Ore, Aluminum and Copper prices are recovering fast lately thanks to better economic growth around the world
  • $1.5B additional cost cutting by 2020
  • Large new projects coming live in the next years:
  • Silvergrass, high margin Australian Iron Ore mine, adding 10mn tons and 500m$ cash flow
  • Oyu Tolgoi, world largest Copper reserve in the world and next to China. More than $1B cash flow expected by 2020 and 4B$ expected revenue by 2025
  • Amrun, large Bauxite mine (base for Aluminum) with $500m cash flow opportunity in 2019

Financial Position

As mentioned, Rio is in a very solid financial position, after they have decreased Net debt from $27B to $7.5B in the last 3 years. Rio could pay it back with few months of current cash flow.

Rio Tinto Balance Sheet Strength

Capital allocation

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Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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