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What are we looking for?

Securities known as American depositary receipts, or ADRs, can offer the best of both worlds for Canadian investors mindful of diversification: foreign equity exposure that is easily accessible to North Americans. Today we focus on ADRs showing high levels of wealth creation for their shareholders – as well as attractive dividend growth rates.

The screen

We searched all ADR stocks (about 800) covered by StockPointer by looking at the following metrics:

  • Market cap of $5-billion (U.S.) or greater;
  • An economic performance index, or EPI (return on capital divided by cost of capital) above 1.0. An EPI ratio of 1.0 or more indicates a company’s capacity to create wealth for its shareholders (a higher EPI displays a greater rate of wealth creation);
  • A return on capital of 10 per cent or greater;
  • A dividend yield of 1 per cent or greater;
  • A dividend growth rate of 5 per cent a year or greater over the past four years;
  • Positive free cash flow to capital. This ratio gives a sense of how well the company uses the invested capital to generate free cash flows, which could be used to stimulate growth, pay and/or increase dividends, reduce debt, etc. A positive figure is good; 5 per cent and above is excellent.

More about StockPointer

StockPointer is a fundamental analysis tool based on an EVA (economic value-added) model to quickly and easily identify investment opportunities. In addition to providing detailed reports on more than 8,500 companies (Canadian and U.S. stocks and ADRs), StockPointer ( also allows investors to create personalized filters and build custom portfolios.

What did we find?

Only eight companies fit our criteria.

Novo Nordisk A/S, a Denmark-based health-care company specializing in diabetes-care medication and devices, comes up as the best economic performer of the group with an EPI of 6.6. Its huge free-cash-flow-to-capital ratio allows the management to regularly and aggressively increase the dividends paid, and buy back shares. I should add that the company has no long-term debt.

Also worth mentioning is Advanced Semiconductor Engineering, an independent semiconductor assembling and manufacturing test services provider based out of Taiwan. Within the group, the company offers the second-best EPI, the highest dividend yield and very attractive dividend growth rates.

Investors are advised to do additional research prior to investing in any of the companies mentioned.

Jean-Didier Lapointe is a financial analyst for StockPointer at Inovestor Inc.

Select American depositary receipts

CompanyTickerMkt. Cap. (US$ Bil.)EPIR/CDiv. Yld. % (LTM)1Y Div. Grth./Yr. %2Y Div. Gr./Yr. %3Y Div. Gr./Yr. %4Y Div. Grth./Yr. %FCF/Capital
Novo-Nordisk A/SNVO-N1146.659.1%1.7%31.3%7.4%15.6%17.5%26.8%
Adv. Semiconductor Engineer.ASX-N92.215.7%4.4%44.4%32.5%40.8%33.8%5.0%
Taiwan SemiconductorTSM-N1382.119.5%3.4%44.7%20.1%13.3%8.7%8.2%
BT Group PLCBT-N541.512.9%3.6%7.6%11.2%12.1%12.5%5.0%
Smith & Nephew PLCSNN-N151.512.4%1.9%8.6%6.9%13.7%16.7%5.5%
Everest Re Group Ltd.RE-N81.310.6%2.4%22.2%27.0%31.8%23.0%16.0%
Steris PLCSTE-N61.312.0%1.4%8.9%9.3%9.8%10.4%2.8%
Anheuser-Busch InBevBUD-N2111.210.7%3.1%22.0%14.2%36.3%35.3%1.3%

Source: StockPointer