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U.S. investors have few good choices right now. Our credit markets are seized up and bonds are fraught with risk … interest rates on most conservative safe havens are insultingly low … and our economy is getting weaker not stronger.
What’s more, the U.S. dollar has gotten creamed for all the reasons I just cited.
As a citizen of this country, it sickens me to see the greenback sinking lower and lower.
And since I’ll be traveling to both Latin America and Asia in the next two months, that’s doubly true … I don’t even want to think how much more expensive things will be!
Still, there’s a bright side …
Some of My Favorite Companies
Profit from the Dollar’s Slump!
Take a look at the second-quarter earnings reports that have come out in the last two weeks and you’ll see what I mean …
Pfizer, the world’s biggest drug company, said its earnings more than doubled because of strong overseas sales and the depressed value of the dollar. (Aggressive cost-cutting helped, too.)
The company’s CEO, Jeff Kindler, told the Associated Press that his company is going to continue focusing on emerging market economies. Why? Because analysts believe there is an $80-billion opportunity through 2012 for big pharma to sell more products in these overseas markets.
And a falling dollar makes that market ever bigger!
What about Philip Morris International, which was recently spun off from parent company Altria?
Same story: Second-quarter profits rose 23% on a weak dollar. Of the company’s $2.8 billion in profits, about $277 million worth was the result of a weaker greenback.
And I should mention that the company boosted its full-year earnings guidance for the second time in 2008!
Meanwhile, Colgate-Palmolive increased its earnings 19% from the same quarter last year. And the firm noted that its results directly benefited from sales in emerging markets coupled with the weak dollar. In fact, while sales increased 16.5%, a sinking greenback accounted for seven of those percentage points.
As You Can See, a Weak Dollar Helps
These Companies! Here’s Why …
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| Pfizer’s CEO Jeff Kindler has pointed out the value of catering to foreign markets. |
When Pfizer, Philip Morris, and Colgate sell their products in foreign markets, they price them in euros, Japanese yen, Australian dollars or Brazilian reals. But when it comes time to tally those sales and bring the money home, they get translated back into U.S. dollars.
Result: A weaker greenback means these companies collect more dollars on every foreign sale.
Moreover, this same phenomenon allows U.S. companies to charge less for their products in foreign markets and STILL get the same dollar amount in sales. That makes the companies more competitive on the world stage.
Please note that it’s not one particular industry that benefits from this phenomenon. Pharmaceutical firms … tobacco concerns … toothpaste makers … they all gain from a falling dollar as long as they’re selling a lot of goods overseas.
Even a U.S. engineering firm that did a project in London would benefit from a weaker dollar.
Of course, it helps that the three companies I mentioned today boast world famous, market-leading brands.
After all, even during a recession (in the U.S. or a foreign country!) consumers will still take their medicine, smoke, and brush their teeth. That gives these firms steady demand around the world, no matter what.
The Best Part: These Same Companies
Love Paying Out Big Dividends …
Many of the U.S. companies getting the most out of the weak dollar also happen to be the strongest dividend-paying companies in America.
Why do the two go virtually hand-in-hand? Because it takes a well-established business to be able to make inroads into overseas markets.
And, at the same time, it also takes an established business to write dividend checks to shareholders.
Pfizer has paid — and increased — its dividend for 41 straight years.
Philip Morris International, while a newly spun off company, has Altria’s tremendous history of dividend payments behind it. And already, the shares have delivered a dividend of their own.
Meanwhile, Colgate has paid continuous dividends on its common stock since 1845! And it’s increased the payment for 45 years straight.
So the next time you hear about the falling dollar, remember that for some companies it means big profits … and thus, for savvy investors, it can also mean big dividend checks.
Best wishes,
Nilus
P.S. I am also seeing some terrific opportunities for higher-yielding stocks right now. In fact, I just issued three new special reports about stocks with solid double-digit yields. To learn about the three companies I’m recommending, and to find out how to get the reports for free, click here.
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