Next month could delivera shock to the system if the US Federal Reserve really does hike interest rates for the first time in nearly a decade.
The last time the Fed actually liftedrates was in June 2006, so for many newbie investors this will be unknown territory. Itmay knock markets off course (as it did last time) but there will be somepositives for UKinvestors.High interest rates mean a stronger dollar, especially if the Fed hikes rates twice this year, as many expect.
This is good news for Britains with shares in FTSE 100 companies that pay their dividends in dollars, whoseincome will look even more attractive when converted into relatively weak sterling.The last 12 months have already been good news for dollar dividends, with the pound falling to $1.55 today, against $1.66 one year ago, a drop of 6.6%.Now there could be more to come.
Here are three companies that should benefit.
Pharmaceutical giant AstraZeneca (LSE: AZN) currently yields 4.20% and the money hits your bank account in dollars, which means it could look evenjuicier next month.
The stock has had a tough time lately, however, falling 6.8% in the last six months, worse than the 5% drop in the FTSE 100. Q2 core operating profits fell 4% to 3.62 bn, as management focuses on investing heavily in its drugs pipeline.Things could get tougher withtreatments Crestor and Nexium both coming off patent in the next couple of years, asthey accounted for a third of group sales last year.
AZNs future will largely depend on whetherchief executive Pascal Soriot is right to put his faith in the companys new generation of blockbuster cancer drugs, which he hopes will deliver $45bn-plus revenues by 2023. But itis nice to see a FTSE 100 company investing hard for the future, given so much short-termism elsewhere. And you get a dollar-driven dividend while you wait.
Investors in troubled mining giant BHP Billiton (LSE: BLT) need some good news, with the stock down almost 40% in the last year on falling demand from China.Personally, I think China will get worse before things get better, although there are signs that the authorities latest stimulusthis package will keep the growth storyrattling alongfor a few years more.
What is bad news for BHP Billitons share price is good news for income investors, with the stock now yielding 6.39%. A stronger dollar would give a further real-terms boost to UK investors.
BHP Billiton is nowdividend dynamite, although unless they are reversed, falling metals prices (iron ore now trades at $56 a tonne against $140 in January last year) must eventually force management to cut the payout. The board remains committed to the dividend from now, but expectrumblingsahead.
Household goods giant Unilever (LSE: ULVR) is much admired by investors but its success has a downside: it has historically traded at more than 20 times earnings and yields as low as 2.5%.
Recent share price slippage has improved both figures, with the price/earnings ratio at a relatively (for Unilever) affordable 17 times, and the yield at 3.22%. A dollar surge could make that yield a little more rewarding.
Many investors backed Unilever as a safe way to play China and emerging markets, and sales from this source are still growing at around 6.5%, although the days of double-digit growth are over. Worryingly, European sales are falling.
But Unilever has delivered the goods from more than 20 years and at todays price long-term investors should still clean up.
Juicy dividend stocks like these three are a great way to build long-term wealth, provided you reinvested your income for growth.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of Unilever. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.