With the Canadian dollar more or less at par with the U.S. dollar and our neighbour to the south in slow recovery mode, I have become interested in adding some U.S. dividend stocks to my portfolio.

I have been happy with my Canadian stocks but let’s face it, if it’s good dividends we’re after, we are pretty well limited to financial, telecom, utility and resource stocks.  We have to go beyond our borders to get more diversification.  Many U.S. companies have few or no Canadian counterparts especially in consumer products, manufacturing and health services, and the multinational companies have global appeal.

Even with the 15% withholding tax on dividends (except in an RRSP), some of the blue chip corporations have a high enough dividend yield to make it worthwhile, especially if the dividends continue to increase.  For example, McDonald’s recently increased their dividend from $2.25 to $2.44, increasing the yield from 3% to 3.3%.

Some other companies that are predicted to increase dividends this year are:

Company Price Dividend Yield
Johnson & Johnson $62.56 $2.16 3.5%
Coca Cola $63.13 $1.76 2.8%
Proctor & Gamble $65.53 $1.93 2.9%

Another good bet for a U.S. dividend stock is Merck.  At $34.23 the price is a bit more within my range.  And with a dividend of $1.52 giving a yield of 4.4% it may be worth thinking about.

Some prices are still too high though for my budget.  I would have to purchase small amounts over a period of time to have a worthwhile portfolio and I haven’t yet decided if that’s the right track for me – although I have always wanted to own a piece of Wal-Mart.

You can download a list of the S&P High Yield Dividend Aristocrats at www.standardandpoors.com/indices.

Are there any U.S. dividend stocks on your watch list?

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7 Comments

  1. FB @ FabulouslyBroke.com on January 20, 2011 at 7:17 am

    All solid picks. none of those companies are disappearing any time soon!

  2. Gary Daniels on January 20, 2011 at 8:07 am

    How are US dividends treated? Who gets the income tax — the US or Canada or both?

    • Boomer on January 20, 2011 at 6:50 pm

      @Gary Daniels. The US gets first grab of 15%.

  3. Steve Zussino on January 20, 2011 at 9:03 am

    I have Unilever in my RRSP for a little diversification.

  4. Financial Uproar on January 20, 2011 at 12:26 pm

    Back in 2002, McDonalds was trading for $12.50, paying 24 cents a year in dividends. I didn’t buy it. It still makes me angry 10 years later.

    Pfizer has about the same yield as Merck, with analysts saying their drug pipeline is the best it’s been in years.

  5. Sam on January 20, 2011 at 8:38 pm

    I understand the appeal of US dividend stocks (especially the good ones, some of which are listed here). These are great companies that have global reach. But my question is, if you have the 15% withholding tax taken off, only then to have have ‘the rest’ of the dividend get taxed as regular income in Canada, doesn’t that really sour the experience? What actually makes it into your pocket is significantly less. Yes, I know, dividends from good companies “rise” but still.

    It seems to me that one of the biggest treats of being a Canadian dividend investor (Cdn companies) is being able to take advantage of the Dividend Tax Credit. So even though it would be nice to have some of those US heavyweights in your portfolio, there are enough good Cdn dividend companies to invest in AND reap the benefit of the Dividend Tax Credit.

    • Boomer on February 8, 2011 at 5:39 pm

      Hi Sam. You are absolutely right. I am a dividend investor with a only Canadian companies in my portfolio. I was only musing about whether it would be worth purchasing some US companies now that our $ is more or less equal as previously the rate difference was a distinct disadvantage.

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