Price Growth & Yield: For That Magical Combo, Leave the U.S.

Key Points

• Three foreign stocks, Takeda Pharmaceutical, United Microelectronics and Coca-Cola FEMSA are showing that magical combination of growth and yield.
• These are cases of mature, dividend-paying companies with long histories of profitability, that have outpaced the broad market in terms of price gains.
• It’s not necessary to chase the highest yield. But if you can find a combination of growth and yield in individual stocks, those may be worth a look. 

It’s not often you find one stock with sustained price growth and solid dividend yield, but three foreign stocks, Takeda Pharmaceutical Co., Ltd. NYSE: TAK, United Microelectronics Corp. NYSE: UMC and Coca-Cola FEMSA SAB de CV NYSE: KOF are showing that magical combination. Although all are headquartered outside the U.S., all are traded on the NYSE exchange as American Depositary Receipts. 

At the most basic level, growth and yield tend to be opposing processes. Growth companies typically reinvest most of their earnings back into the business to fund expansion, research and development, or other growth opportunities. That means there’s not much excess cash available as a shareholder payout. In fact, management has decided that at least for the moment, growth is more important. 

Conversely, companies that pay a high dividend yield may have decided that growth opportunities are limited, and have opted to attract and retain investment through dividends. That’s why you often see mature, established companies among the ranks of those with steadily increasing dividends.

Neither approach is wrong; in fact, in a diversified portfolio, you should own both types of stocks. 

It’s not necessary to chase the highest yield. In fact, chasing a high yield could lead you to some troubled companies. But if you can find a combination of growth and yield in individual stocks, those may be worth a look. 

Takeda Pharmaceutical

Tokyo-based Takeda is a global pharmaceutical company that develops and markets treatments for a range of conditions. Its primary areas of focus are gastroenterology, oncology, neuroscience and rare diseases. It also develops plasma-derived therapies, used to treat conditions including liver disease, hemophilia, autoimmune diseases, and burns, among others. 

Takeda is squarely in the zone of a well-established company that is profitable due to its portfolio of high-demand products. That’s true of many pharma firms. 

The stock’s dividend yield is 3.5%.  

Takeda has shown good price appreciation recently, returning 4.60% in the past month, and 9.50% in the past three months. Looking at its chart, you can see that Takeda recently cleared a buy point above $16.30. The stock is currently in buy range, as it’s trading only pennies above that buy point. 

United Microelectronics

Taiwan-based United Microelectronics is a contract manufacturer of integrated circuits. Provides design, testing, and manufacturing services, as well as support services to help its customers bring products to market.  

Its wider industry, semiconductor manufacturing, is among the market leaders. When you see a stock in a market-leading field, it’s a sign that its products and services are in high demand. A standout stock in a poor industry can be a winner for investors, but it raises the risk that industry-wide problems will eventually affect your stock.

United Micro’s dividend yield is 5.71%. It increased its dividend in each of the past three years. The company went public in 2000. It’s similar to Takeda, in that it’s well-established with a long history of profitability. 

The stock’s chart shows a flat base with a buy point of $8.67 that began in February. It cleared that point on March 16, but continues to hit resistance below $8.90. Watch for momentum to pick up and send the stock into a new rally. 

United Micro has shown strong price appreciation, as well, returning 8.02% in the past month and 29.06% in the past three months, outpacing the ICE Semiconductor Index, of which it’s a component. You can gauge United Micro’s performance versus its index using the iShares Semiconductor ETF NYSEARCA: SOXX as a proxy.

Coca-Cola FEMSA

If you’re an aficionado of Mexican Coca-Cola, supposedly made with real sugar instead of high-fructose corn syrup, and served up in nostalgic glass bottles, then you’re consuming products exported by this Monterrey, Mexico-based bottler. It’s among the world’s largest bottlers of Coca-Cola Co. NYSE: KO products. 

The stock’s dividend yield is 3.25%. The company boosted its payout in each of the past four years. 

Its chart shows that the stock broke out of a shallow base on March 8, then pulled back to find support at its 50-day moving average. It’s currently in the midst of another 50-day pullback, with a possible buy point above $79.16. 

Shares returned 5.83% in the past month and 11.90% in the past three months. 

Once again, you’re looking at a mature company with strong growth prospects, that also has a long history of returning capital to shareholders. 

One caveat on this stock: It’s formed a repeated series of shallow bases and 50-day pullbacks. It may be the case that a sharper pullback that undercuts prior structure lows may be in order, to set the stage for a bigger rally. 

Nonetheless, MarketBeat data show that analysts have a consensus price target of $90.20, an upside of 17.25%