3 High-Yield Dividend Stocks With an International Flavor

Most U.S. investors focus exclusively on U.S. stocks, which is a shame because they narrow their options while missing some attractive international stocks that offer high-dividend yields and diversification. Let's check out the prospects of three international stocks -- BP , Novartis and British American Tobacco -- that are offering high dividend yields right now. Their yields become even more attractive if one considers the rich valuation of the S&P 500. BP BP is one of the largest oil and gas corporations in the world. It operates in two segments -- upstream and downstream, the latter being mostly refining. BP has paid about $70 billion for its catastrophic accident in the Gulf of Mexico in 2010 and keeps paying up to $2 billion per year for that disaster. Consequently, it has a high debt load and is very sensitive to the cycles of the price of oil. Due to the coronavirus crisis, BP incurred hefty losses last year and cut its dividend by 50%. However, thanks to the rollout of COVID vaccines, the energy market has begun to recover this year. And because of the unprecedented production cuts of OPEC and Russia, the price of oil has rallied to pre-pandemic levels. The benefit of higher oil prices has been prominent in the last two earnings reports of BP. Thanks to high oil and gas prices and improved refining margins, BP posted earnings per share of $0.78 in the first quarter and $0.83 in the second quarter, which are among the best bottom-line results turned in by BP in the last seven years. In addition, thanks to the sustained improvement in its business conditions, BP is likely to exceed its pre-pandemic earnings per share of $2.95 this year. However, BP is facing a secular threat, namely the transition from fossil fuels to renewable energy sources, a transition that has accelerated since the onset of the pandemic. This transition has led BP to change its business model drastically. BP now intends to increase its investment in clean energy tenfold in an effort to increase its renewable energy generating capacity twentyfold over the next decade. It also targets a tenfold increase in the number of charging points of electric vehicles. The strategic shift means BP will reduce its investment in oil and gas projects to the point where it expects to reduce its oil and gas production by 42% over the next decade, from 2.6 million barrels per day now to 1.5 million barrels per day in 2030. Nevertheless, as long as oil prices remain elevated, BP will continue to thrive. Although BP slashed its dividend by 50% last year, it is still offering an attractive yield of 5.4%. In addition, the stock has a payout ratio of only 40% thanks to its strong earnings this year, so the dividend has a wide margin of safety. BP raised its dividend by 4% this year and pledged to continue raising it by 4% per year if the price of oil remains around $60. At that level of oil prices, BP also expects to repurchase $1 billion of its stock per year. Overall, as long as oil prices remain healthy, BP will be offering an attractive dividend, though the stock will come under pressure whenever the next downturn of the energy market shows up. Novartis Novartis is a pharmaceutical giant that is headquartered in Switzerland. It develops, makes and markets healthcare products worldwide. It operates in two segments, namely Innovative Medicines and Sandoz. Innovative Medicines includes prescription medicines for patients and healthcare providers. Sandoz is the arm of Novartis that produces generic drugs, or those drugs manufactured after the expiration of the patent of the prototypes. The growth driver of Novartis has been its Innovative Medicines segment, whereas its Sandoz business has been facing intense competition and pricing pressure for several quarters in a row. Sandoz was also severely hurt by the pandemic in previous quarters as the lockdowns and social distancing measures caused a historically low cough and cold season. Despite that headwind, Novartis achieved record earnings last year thanks to the strong performance of its innovative business. The strong momentum has remained in place this year. In the second quarter, Novartis grew its revenue 14%, to $13.0 billion, and exceeded the analysts' expectations by $550 million. It also increased its earnings per share 22%, from $1.36 to $1.66, and exceeded the analysts' consensus by $0.17. The strong performance resulted from 13% volume growth, which was slightly offset by lower prices. It is also worth noting that Sandoz improved its sales by 5% and showed signs of stabilization for the first time after many quarters. Management issued positive guidance as it expects the core operating income of Innovative Medicines to grow at a mid-single digit percentage rate this year. Overall, thanks to the strong business momentum of Innovative Medicines, Novartis is on track to post record earnings per share for a fourth consecutive year. Novartis also seems poised to continue growing its earnings for many years. Entresto, which is used in the treatment of chronic heart failure, has become a first-line therapy for heart failure patients and is a strong growth driver. Novartis has a strong pipeline of Innovative Medicines and expects to enhance its operating margin in this segment from 32% in 2018 and 35% in 2020 to the high 30% range over the next three to five years. It expects to achieve this goal thanks to its key innovative medicines and its productivity program, which aims to reduce annual operating expenses by $2 billion. Moreover, Novartis has raised its dividend for 25 consecutive years and currently sports a 3.5% dividend yield, with a healthy payout ratio of 54%. Novartis has enjoyed excessive free cash flows every year in the last decade. For instance, in each of the last two years the pharmaceutical giant achieved free cash flows of about $13.5 billion, or around $6 per share. Given the excessive free cash flows of Novartis, its business momentum, its growth prospects and its resilience to recessions, investors should rest assured that the company will easily continue raising its dividend in a meaningful way for many more years. British American Tobacco British American Tobacco is one of the largest tobacco companies in the world. It owns many tobacco brands, including Kool, Benson & Hedges, Dunhill, Kent and Lucky Strike. British American Tobacco is going through a big transition right now. It is trying to grow sales of reduced-risk products at the expense of its traditional cigarettes. It has set a goal to reach 50 million consumers of non-combustible products by 2030 and nearly $7.0 billion of sales of these products by 2025. The decline of the company's traditional business may raise a red flag for some investors, but the tobacco industry is characterized by low competition and highly inelastic prices. Thanks to these characteristics, British American Tobacco has grown its earnings per share consistently for years even though the percent of smoking population has been on a steady decline. It is also worth noting that the company posted record earnings per share of $4.58 last year despite the ongoing transition and the coronavirus crisis. It is evident that the tobacco giant has a resilient business model that has not been hurt by the changing business landscape and the most severe global recession in decades. Management expects to grow the revenues by 3% to 5% per year and earnings per share at a high single-digit percentage rate annually in the coming years. Therefore, investors should rest assured that the long-term growth trajectory of the tobacco giant is intact. Moreover, British American Tobacco offers an exceptional 7.7% dividend yield at present. The stock has a payout ratio of only 62%, which implies a secure payout. British American Tobacco sports a strong interest coverage ratio of 6.6. Given its promising growth prospects, its dividend should be considered safe for the foreseeable future.

3 High-Yield Dividend Stocks With an International Flavor

BP, Novartis and British American Tobacco offer healthy payouts that look secure for years to come.

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