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Investing Vodafone & Other British ADRs

How to Invest in Britain's ADRs

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Britain houses the world's sixth largest economy with a nominal gross domestic product ("GDP") of more than $2.4 trillion in 2012. But, most investors know the region best for London - one of the world's leading financial centers. The London Stock Exchange ("LSE") is the fourth largest stock exchange in the world with a market capitalization of over $3.2 trillion in 2012, while its FTSE indexes are among the most watched in the world.

In this article, we'll take a look at the region's most popular American Depository Receipt ("ADR"), Vodafone Group plc, and other publicly traded companies that U.S. investors can purchase on U.S. stock exchanges.

Vodafone: Britain's Most Popular ADR

Vodafone Group plc (VOD) is the most popular British ADR in the world, with a market capitalization of over $144 billion, as of mid-2013. With operations in 30 countries and over 40 partner markets worldwide, the company provides mobile communication services, including voice, messaging, data and fixed line solutions and devices. In the U.S., the firm holds a sizable stake in Verizon Communications' (VZ) Verizon Wireless business.

In FY 2012, Vodafone Group generated revenues of $46.42 billion and net income of $6.96 billion, or $1.36 per diluted share, with 5.1 billion shares outstanding. The company also pays a 5.34% dividend yield that has steadily risen since at least 1989, which has attracted many income investors both for the domestically traded stock at the U.S. ADR.

Investors in the U.S. can purchase ADR shares on the NASDAQ under the ticker symbol "VOD", but should consult their financial advisor before making any decisions.

Other Popular British ADRs

Britain is home to many ADRs or U.S. dual listings, given the LSE's popularity as Europe's primarily stock exchange. From BP to Unilever, many of these companies are household names in the U.S. and widely popular among investors, with trading volumes that make them appear as if they were a domestic firm rather than an ADR. Their large market capitalizations and global operations also make them ideal for international diversification of a portfolio.

Some of these other British ADRs include:

  • HSBC Holdings plc (HBC) - A leading banking and financial services company with around 89 million global customers spanning 85 countries.
  • BHP Billiton plc (BBL) - A diversified natural resources company that produced over 200 million barrels of oil equivalent and 1.2 million tons of aluminum.
  • BP plc (BP) - An integrated oil and gas company involved with exploration, production, refining and marketing, with operations around the world.
  • GlaxoSmithKline plc (GSK) - A global healthcare group that's engaged in all stages of the drug development process, ranging from research to marketing.
  • Unilever plc (UN) - A supplier of fast-moving consumer goods, including home care, personal care, foods and refreshments.

Key Risks & Considerations

Britain houses one of the world's three largest financial centers, making it important for international investors to watch. With most European companies trading on the LSE, the many U.S. ADRs tend to be European companies with a global reach, making them ideal candidates to help diversify any stock portfolio internationally. Their size and liquidity also means that they are less risky than ADRs trading in many other regions of the world.

However, there are some risks that investors should carefully consider. While the dividend taxes are generally traded the same as domestic securities, some countries will withhold taxes on dividends paid and the investor must still pay U.S. income tax on the net amount. ADRs also involve some geopolitical and other risks associated with international investors, although the global companies listed on the LSE help mitigate these risks in the largest securities.

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