4 European Supermarket Giants For Total Returns

The ongoing European crisis, disconcerting and frightening as it may be, has provided an opportunity for the long-term investor looking for value in large-cap stocks. It is true that the world economy is in disarray. Economic growth around the world is slowing down and some major European economies may even shrink. It is difficult to guess how long it will be before things start to improve in Europe (and elsewhere).

I consider myself a contrarian long-term investor who generally looks for dividend growth stocks but sometimes aims for total growth as well. Recently, I have been poring over my various stock watch lists and looking closely at major international supermarket retailers. The common man has been spending less at supermarkets especially on discretionary items and as a result most of these supermarkets had either poor quarterly results or have given profit warnings. The market reacted by punishing the stock prices. However, in some cases, I believe that this has created a buying opportunity for an investor with a minimum holding period of two years.

I must caution the reader that investing in Europe is not for the faint of heart. There are significant risks involved including a continued depreciation of euro and pound against the dollar. There is a real and present danger of dividend cuts as well. Though, I believe that the risk of large grocery chains going out of business is extremely limited. A patient investor just might reap total returns commensurate with the risk involved.

Foreign Tax Withholding on Dividends

Most of the foreign stocks attract a foreign withholding tax on dividends distributed. The implications of foreign taxes have been discussed in a previous article - Foreign Tax and Withholding Tax Rates. The following table lists the key figures and ratios for four grocery and retailing giants. A brief overview of the companies and their businesses is given later. I have extracted all the information in the article from the respective company websites. The dividend yield is computed in U.S. dollars while the dividend growth rates are based on the native currency. If you are new to investing in foreign equities then my two-part Primer on International Investing may provide further reading material - Part 1 and Part 2.