American companies give UK investors access to sectors not available over here, so overcome ‘home bias’ and spread your wings, urges overseas investing expert Rodney Hobson, who has spotted some buying opportunities.
Investors scrambling to use up their ISA entitlement before the end of the financial year would do well to consider overseas stocks quoted on a recognised exchange such as the New York Stock Exchange and Nasdaq. They rank equally with London-based stocks in terms of qualifying for ISA status and they widen the scope of your portfolio.
It is sensible to look for solid companies with a record of paying dividends, preferably with a progressive dividend policy, that can be locked away to produce tax-free income and capital gains. Although American stocks tend to pay lower dividends than UK ones, there are plenty of possibles on offer, and the latest results season has sorted out likely candidates. Many shares have slipped back since mid-December, opening up a buying opportunity.
No portfolio should be without a bank stock, and the sharp rise in American interest rates has allowed the spread between lending and borrowing rates to widen. Meanwhile, the US economy is holding up well.
Citigroup Inc (NYSE:C) shares are currently bumping up against a ceiling but if that breaks, as it should do soon, they may well enjoy a strong surge. The yield of 3.9% is a clear incentive for buyers. This looks the best opportunity in the sector at the moment, but JPMorgan Chase & Co (NYSE:JPM) is an alternative, although the yield is lower at 2.8%.
The oil sector has been under attack by the green lobby and its days may be numbered, but it has been given a new lease of life by President Putin of Russia. With no end to the war in Ukraine in sight, Western oil and gas majors look set to continue cashing in on shortages. Chevron Corp (NYSE:CVX) has a yield of 3.5%, while that for Exxon Mobil Corp (NYSE:XOM) is 3.2%.
Fizzy-drinks maker PepsiCo Inc (NASDAQ:PEP) has raised its dividend for 51 consecutive years and, with its portfolio of well-known brands, that trend could well continue. The shares have come off the top but the downside looks limited so this could be an opportunity to buy. The yield is 2.7%.
Rival Coca-Cola Co (NYSE:KO) has a better yield at nearly 3% but is being squeezed by rising costs. Even so it raised its dividend by 5% last year. Again, there is a chance to buy in more cheaply than in December and again the downside looks limited.
Elsewhere in food and drink, The Kraft Heinz Co (NASDAQ:KHC) serves up a tempting yield of 4.1% backed by a range of solid brands. Figures for last year were distorted by acquisitions and divestments plus a technical adjustment in comparative figures for 2021, but the overall picture is one of momentum running into the current year.
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Pharmaceuticals giant Pfizer Inc (NYSE:PFE) has had another profitable year and is confident of repeating that performance in 2023. The shares have lost 30% of their value since mid-December but should find a floor around the current level just over $40, where the yield is 3.9%.
AbbVie Inc (NYSE:ABBV) is a credible alternative in the sector with a yield of 3.7%, but investors should be aware that its best selling drug Humira has lost its patent protection in the United States and will now come under attack from cheaper alternatives.
Investors who look for possible recovery stories could consider telecoms group Verizon Communications Inc (NYSE:VZ). The shares have twice topped $60 but are now 35% below that peak, pushing the yield up to 6.8%. Most analysts rate the shares as no more than a 'hold' so this is a riskier possibility. So is rival AT&T Inc (NYSE:T) with a yield of 5.9%. Shares in both companies have stabilised of late so this could be a chance to buy in.
Rodney Hobson is a freelance contributor and not a direct employee of interactive investor.
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