Standard & Poor’s recently published its analysis of the sources of revenue for companies in the S&P 500 index. Of the companies with full financial reporting available through 2011, only 53.9% of company revenue was generated from U.S. sales. With 46.1% of revenue generated outside of the United States, it’s clear that even investing only in companies headquartered in the U.S., you are a global investor exposed to local economies and currencies around the globe.
The amount of foreign revenue generated by these companies has ticked down consistently over the past four years from 47.9% in 2008 according to information published in August by S&P Dow Jones Indices.
Many investors have purposefully reduced international holdings, particularly those that are exposed to Europe. But even if you invest in no companies headquartered in Europe, the S&P 500 companies still generated 11.1% of their sales in Europe in 2011. This was down from 13.5% in 2010. Canada accounted for 9.3% of 2011 S&P 500 revenue. Japan’s influence on U.S. companies has declined more than 50% over the past two years. In 2011, Japan sales represented 0.72% of S&P 500 revenue, down from 1.52% in 2009.
Looking at sectors, Information Technology continues to dominate with over 56.3% of its declared sales coming from outside of the United States. Financials were more locally based, deriving 34.7% of revenue abroad.
Interestingly, S&P Dow Jones Indices also determined that S&P 500 companies paid more taxes to foreign entities than they did to the U.S. government. S&P 500 companies sent a cumulative $142 billion to non-U.S. governments and $117 billion to the U.S. government.
“Only 45.3% of all income taxes paid by U.S. companies went to Washington in 2011 versus 54.7% paid abroad,” noted S&P’s Howard Silverblatt. “Tax policy has become a major issue, even before election posturing started, with the current trend not working in favor of the U.S.”
The full report, S&P 500: 2011 Global Sales, is available at www.spindices.com under “Resources.”
While Apple generates the majority of its revenue abroad and Coca-Cola is close to 80% foreign revenue, this is a two-way exchange for foreign companies as well. Many of the largest foreign companies (i.e., Nestle, Samsung, BP, Toyota, many global pharmaceutical companies and banks) generate much of their revenue in the United States.
How do you feel about international investing?
Do you know the actual weight of foreign investments across all your investments?
Are stocks in Europe or the U.S. better priced given their future prospects?
~ Gary Brooks, CFP® — Brooks, Hughes & Jones, Partners in Wealth Management, Tacoma, WA