Editor’s Note: Today’s article makes the case that the income advantage is hiding overseas — in Bangkok, Tokyo, and the 83 countries where Domino’s now operates. For subscribers who prefer their income closer to home, our colleague Robert Rapier has spent 36 years mapping the domestic equivalent: 41 essential-service stocks spread across 33 U.S. cities, with some now yielding 60%, 99%, even 124% on his original investment. See where →

Four hundred basis points.

That’s the year-to-date performance gap between foreign and domestic stocks. The MSCI All-Country World ex-USA Index has advanced 14.0% since the beginning of the year, versus a 10% return for the S&P 500.

That’s a sizeable lead.

As the most common international equity benchmark, the MSCI ACWI tracks nearly 2,000 mid and large-cap stocks based in 46 developed and emerging markets around the globe. It mirrors the performance of Samsung, the Royal Bank of Canada and just about everything in between… capturing 85% of the available market cap outside of our borders.

For most of the past decade, U.S. stocks have consistently whipped their overseas counterparts. But that relationship has flipped. In fact, foreign stocks are currently on pace to outrun U.S. stocks this year by the largest margin since 1995. That advantage is even wider (28.3% to 22.2%) over the trailing 12 months.

I began steering my High-Yield Investing readers into international stocks last October.

Eight of the ten largest banks are located outside the United States. Six of the top ten telecom firms. Half of the biggest energy producers. All good reasons to cast a wider fishing net. But for income hunters, there’s another compelling argument: richer dividend yields.

While the average payout on the S&P 500 has sunk below 1.2%, corporate boardrooms throughout Europe and Asia tend to place far more importance on distributions. Australia and Thailand boast an average rate of 3.5%. Brazilian stocks are paying close to 5%. And it’s common to find 6% yields in Austria and Italy.

After years of lagging behind the U.S., foreign markets are also more attractively valued, trading at inviting Price/Earnings and Price/Book ratios.

Meanwhile, these same regions are benefiting from reforms and stimulus measures that have gone largely unnoticed. Japan is placing renewed emphasis on capital efficiency, unwinding the longstanding practice of cash hoarding. Germany has pledged a trillion euros in post-election fiscal stimulus spending.

And don’t forget currency tailwinds. The U.S. dollar has weakened recently against a basket of foreign currencies. Further depreciation could sweeten returns on foreign assets when all those euros and yen are translated back into greenbacks. Central banks are actively shifting reserves from dollars to gold, hastening this trend.

Yet, many retail investors overlook this asset class entirely. A recent study of 3 million 401(K) plans found that one-in-five participants had exactly zero exposure to foreign stocks. Nada.

Treat your Portfolio to a Staycation
Fortunately, you don’t even need the financial equivalent of a passport to take your portfolio abroad. There’s a homegrown stock (based a few miles from the University of Michigan) that does business in 5,000+ major cities spanning 83 countries.

There are stores in Bangkok, Tokyo and Sao Paulo. Mumbai has over 100 locations. You can even place an order in remote island nations like Mauritius. Worldwide, the chain has grown to 22,000 units, roughly 7,000 in the United States and double that number overseas. And the footprint continues to expand… with another 776 store openings last fiscal year.

That’s about two per day on average.

If you haven’t guessed, I’m talking about Dominos Pizza (NYSE: DPZ). The iconic delivery chain slings about 4 million pizzas per day, along with salads, oven-baked pasta, chocolate lava crunch cakes and other creative menu additions.

Dominos has been immortalized in American films and other pop culture, but it’s the firm’s burgeoning non-American operations that caught my eye. The first location outside North America popped up in Queensland, Australia in 1983. It was introduced to the U.K. a couple years later. And then the flood gates opened, with expansion from China to Nigeria.

Compared to the saturated domestic market, management continues to see strong growth opportunities overseas. Of the 180 new store openings last quarter, 161 were international. But with well over 20,000 locations now, the impact of expansion is slowly diminishing – placing more importance on the existing base of same-store sales, or “comps”.

Incredibly, Domino’s international segment has now delivered 32 consecutive years of positive same-store sales growth – a streak that dates to the mid-90s. This division now accounts for just over half (51%) of the firm’s $20.1 billion in annual systemwide sales. Keep in mind, most of the locations are owned by franchisees, who send in a steady stream of high-margin royalty fees.

Despite rising labor costs, Domino’s delivered $792 million in operating cash flow last year, a healthy increase of 27%. After capital expenditures, the business churned out $670 million in free cash flow (FCF). Management plowed about half of that surplus into stock buybacks, while upping the quarterly dividend by 15% to $1.99 per share.

That deep FCF pool has attracted many institutional investors, including Warren Buffett… who accumulated large blocks (3.3 million shares total) of the stock for six straight quarters before stepping down as Berkshire Hathaway (NYSE: BRK-B) CEO at the end of 2025.

His successor Greg Abel has since sold the stake. Berkshire’s abrupt exit (coupled with a first quarter earnings miss) has taken a toll on the stock this year. Investors have also been rattled by a lowered sales forecast, as consumers retrench and the competitive landscape “intensifies”. A leadership shakeup hasn’t helped.

But these concerns are fully priced in at this point. On Monday, DPZ sank to near a 52-week low below the $300 level. Since peaking near $500 last year, the business has now shed roughly half of its market capitalization and is valued at less than 15 times forward earnings.

I think this selloff is overdone – as do most analysts, who have a consensus $399 target price on the stock. While consumer demand has softened, that’s more of a macro than a company-specific issue. In fact, Domino’s has picked up a full point of market share over the past year. And every point matters in the massive $30 billion domestic QSR pizza category.

To help win back confidence, management has authorized a hefty $1 billion buyback initiative — that investment will stretch much further at $300 per share.

The case Nathan makes today — that the income advantage is hiding in specific overseas cities where U.S. investors rarely look — applies just as well to certain corners of the domestic market. Our colleague Robert Rapier has spent 36 years mapping the U.S. equivalent: essential-service companies anchored to specific cities, quietly raising dividends while most investors chase growth stocks on the coasts. His Utility Forecaster portfolio now spans 41 stocks across 33 cities, with a 923% average total return and an average yield of 33% on his original investment. A utility in North Dakota has produced a 5,213% total gain over 35 years. A water company in Philadelphia is yielding him 99.5% annually. The income isn’t always where you’d expect. See Robert’s full Dividend Map →