U.S. stock and bond markets gave investors much to like last year. Stocks closed 2019 with a string of records. Treasuries rallied, as investors sought havens from geopolitical storms.
The one thing they didn’t provide? Strong yield.
The S&P 500 index’s dividend yield was recently 1.80%, down from 1.92% as recently as October—and a reminder of how well U.S. stocks have performed during the decadelong bull run. As stock prices go up, yields tend to compress.
The 10-year Treasury, meanwhile, recently yielded 1.6%, versus 1.9% at the end of last year. Its decline has been driven not only by its status as a haven asset, but also thanks to the Federal Reserve’s reversal on monetary policy; the central bank cut short-term interest rates three times last year and says it expects to keep them steady for a while.
Income investors need not despair. While bond yields in many parts of the world are even lower than they are in the U.S., there’s plenty of yield available in a sometimes-overlooked corner of the market: international dividend stocks.
“If you are an income investor, especially with any long-term thought process, it really makes sense to be a global investor, as opposed to being just a domestic one,” says Jason Brady, CEO of Thornburg Investment Management and a portfolio co-manager of the Thornburg Income Builder fund (ticker: TIBAX). “You are getting better value in other parts of the world.”