For financial advisors looking to diversify beyond the U.S. market rally driven by AI, international equities offer more than just a valuation story. Pravir Singh, Director of International Research at Schafer Cullen Capital Management, argues that the current cycle of international outperformance still has significant room to run—and the structural advantages of ex-U.S. markets may surprise advisors who view international exposure as merely a contrarian play.
“The area of strength for the U.S. is technology as a sector. But when you look at many other industries and sectors—be it consumer companies, industrial companies, materials companies, healthcare companies—many of the best companies in the world are outside the U.S.,” Singh tells The Wealth Advisor’s Scott Martin.
From valuation discounts that persist despite strong year-to-date returns to the concentration risks inherent in U.S. portfolios, Singh makes the case for why international equities deserve serious reconsideration. The opportunity spans multiple dimensions: income generation that dwarfs domestic yields, exposure to world-class companies outside the technology sector, improving political and fiscal environments in unexpected places, and the potential for currency tailwinds should the dollar’s 15-year rally reverse course.
The Valuation Gap Remains Wide
Even after international equities posted roughly 25% returns in 2025 through late November, the discount to U.S. stocks remained substantial. Singh points out that Schafer Cullen’s international portfolio tends to trade at about 13 times earnings, compared with the S&P 500 at 23–25 times.
Income adds another layer to the story. Schafer Cullen’s international holdings have yielded approximately 4.4%, with companies buying back another 1% of shares annually. By contrast, the S&P 500’s combined dividend and buyback rate is roughly 2%.
“Just like when you go shopping, you want a deal,” Singh says. “I think international equities today are quite a big deal compared to their U.S. peers, which look more expensive to us.”
Examining individual holdings against U.S. peers shows similar gaps, often 30–50% discounts. The MSCI EAFE Index trades around 15 times earnings—still well below U.S. multiples—while Schafer Cullen’s value-driven approach pushes portfolio valuations even lower. For advisors concerned that clients may have missed the move, Singh believes there may be plenty of room to capture value.
Beyond Technology: Where Global Leadership Resides
The dominance of U.S. tech stocks has fueled a narrative that American companies lead across the board. Headlines focus on AI and the Silicon Valley revolution, but global competitive positioning tells a more nuanced story. While the U.S. maintains its technological edge, world-class companies in consumer goods, industrials, materials, and healthcare often are based outside American borders.
Heavy portfolio weighting toward a single sector introduces vulnerabilities that many clients may underestimate. When one industry dominates returns to the degree technology has in recent years, portfolios become exposed to sector-specific risks that could materialize if sentiment shifts or fundamentals disappoint.
“I almost think the U.S. at this point is one big bet on AI,” says Singh. “That’s your big bet, and if it works, it’ll work. If it doesn’t work, there’s probably going to be a lot of trouble.” Conversely, he observes, international markets offer multiple paths to successful outcomes rather than a single binary proposition: “I just think there are four or five different ways where I think the entire investment case does work out.”
For advisors managing clients wary of single-theme risk, international equities can provide genuine diversification across sectors where non-U.S. companies hold competitive advantages. Global industrial expansion, driven by electrification, power grid upgrades, and defense spending, continues apace. Financial sectors abroad often operate with lower leverage and fewer risks from commercial real estate or aggressive private lending than U.S. counterparts.
“The gap is huge, and if technology cools off, there’s so many other parts of the market or the global economy where the best companies are not necessarily always in the U.S.,” Singh emphasizes.
The Active Management Case Strengthens
The universe of international dividend-paying stocks dwarfs domestic opportunities. Companies outside the U.S. with market capitalizations exceeding $1 billion and dividend yields of 3% or higher number more than 2,500. Running the same screen domestically produces just over 400 companies. The six-fold difference in opportunity set creates fertile ground for active managers.
Singh describes the firm’s approach as global deal-seeking aimed at identifying quality companies trading at attractive valuations. “We are value investors,” he says. “So, our core strength is to try to identify these companies with amazing resilience, pricing power dominance—which have been ignored or discarded by the market because of some short-term factors. That’s our core skillset, which we are applying to this large universe.”
The patience required to capture value in misunderstood situations defines the strategy’s time horizon. “We are global bargain hunters looking for a jewel that’s been thrown away or misunderstood that could be quite valuable if we are patient and hold on to it for the next five years,” Singh explains.
The size of the international universe can make concentrated, high-conviction portfolios particularly valuable. “That’s one of the reasons why a really good active manager who’s trying to run a concentrated portfolio can add a lot of value,” notes Singh, “because you really have a much bigger universe to work with and then you can narrow that universe down to get the most attractive exposure possible.”
Schafer Cullen operates without benchmark constraints, running what Singh describes as a benchmark-agnostic strategy. The firm tracks five indices—MSCI EAFE, MSCI EAFE Value, MSCI ACWI ex-U.S., MSCI ACWI ex-U.S. Value, and MSCI EAFE High Dividend—but deliberately avoids anchoring to any single benchmark.
“We don’t hug any benchmarks. We don’t try to copy anybody else,” he explains. “Our objectives are that we want to outperform the market over a full market cycle, we want to generate above-average income, and we want to have better-than-average performance in periods when the market is declining.”
This approach aims to deliver results distinct from passive methodologies designed to capture market returns. “Those are the three primary objectives of the strategy. And as long as we feel we can do that, I think we offer a very compelling product,” says Singh.
A Four-Pillar Top-Down Framework
While bottom-up security selection drives portfolio construction, Schafer Cullen supplements stock-picking with a proprietary country analysis model. The framework evaluates four key factors: competitive positioning of companies within each country, banking system health, external strength (measuring trade balances and reserve adequacy), and political risk.
Regarding the external strength analysis, Singh points out that “it’s important to study that relationship because that has repercussions for the currency value of a country.” Understanding how countries interact with the global economy helps distinguish genuine value opportunities from statistical cheapness that reflects deteriorating fundamentals.
Political risk assessment has also shifted in surprising ways over the past decade, Singh notes. The U.S. and U.K. have faced rising fiscal and governance pressures, while certain Latin American nations have implemented targeted reforms and market-friendly policies, though the region remains uneven. In some cases, countries are running fiscal deficits close to 3% of GDP, a contrast to the larger deficits often seen in developed markets, highlighting pockets of improvement without suggesting broad uniform stability.
“The world is changing,” Singh says. “That’s one important message. And I think sometimes people’s portfolios are lagging the fact that this world has changed and different things are happening and you have to probably reposition yourself because the world keeps changing.”
The Currency Tailwind Potential
The U.S. dollar has strengthened over the past 15 years, supported by its reserve currency status and the domestic tech sector’s dominance. Singh highlights historical links between dollar strength and tech outperformance, citing the late 1990s tech boom as a parallel.
“So, if the U.S. dollar has done well for the last 15 years and that’s corresponded with the tech sector outperforming, and the prior cycle when we had strengthened the U.S. dollar was no coincidence,” he explains.
The dollar now trades at elevated levels on a purchasing power parity basis. Should other asset classes outside the U.S. begin attracting capital flows, the dollar could face headwinds. Foreign investors own approximately 30% of U.S. stocks and bonds. A shift in sentiment toward ex-U.S. opportunities could influence both dollar values and U.S. asset prices.
Singh frames the potential scenario without predicting doom for U.S. markets. “It’s not that I’m saying the U.S. is going to have some major problems, but it just could be that other places might just be more interesting—they might have better valuations, better fundamentals, better growth outlooks—and the money flows where the opportunities are,” he notes. “And if that happens, the dollar would weaken.”
For international equity investors, dollar weakness can provide a meaningful boost to returns measured in dollar terms. “I don’t think it’s aggressive to say maybe the dollar declines 3% a year against a basket of foreign currencies, so that 4.5% [yield] becomes more like 7–8%, and that’s quite attractive, I think,” says Singh.
He characterizes currency exposure as supplementary, rather than foundational, to the investment case, believing that “the best ideas are the simple ideas”—and currency forecasting can present a challenge. “It’s tough to measure them precisely, but it’s probably the fourth or fifth reason why international markets, I think, makes sense is the fact that you could have a tailwind from currencies.”
Why Passive Won’t Cut It
The recent surge of interest in international dividend strategies has spawned numerous ETF launches. Singh cautions advisors about the limitations of passive approaches in a complex, expansive universe where mistakes can carry severe consequences.
“People have realized this could be a lucrative opportunity. Some people have more recently launched certain ETFs or index products to try to capture this opportunity, but I would just note that it’s not so easy to run a dividend strategy internationally,” he cautions. “There are great opportunities, but there are huge pitfalls, ways you can blow up.”
Index products often chase the highest absolute yields, which frequently signals distress rather than opportunity. Country allocation mistakes can prove catastrophic—Russia’s 2022 collapse eliminated positions entirely for investors holding exposure. COVID-19 provided another stark lesson when European regulators asked banks to suspend dividends, resulting in 20–25% dividend cuts for ETFs heavily weighted toward European financials. Singh notes that Schafer Cullen experienced cuts of just 4–5% during the same period, followed by double-digit dividend growth in subsequent years.
He emphasizes the learning curve his team has already completed, citing the value of two decades spent navigating international markets through multiple crises. “We’ve been running our strategy for 20 years, so we’ve been through the test of fire so that your clients now don’t have to get burned,” says Singh.
The complexity of international investing—including different tax regimes, linguistic barriers in reporting, varying regulatory attitudes toward dividends, and currency considerations—demands expertise that quantitative screens cannot replicate. “So, you want to be a little careful, even if you like the idea of international and dividends,” he adds. “And the question really is should you go active or passive? I would make the case that, in this instance, you definitely want to go active because the universe is so large and there are so many moving parts.”
The combination of opportunity size and operational complexity creates an environment where missteps can compound quickly, positioning active management as increasingly valuable for navigating the space. “There are so many ways it could go potentially wrong. You want to be a little careful in how you approach this opportunity,” Singh concludes.
Putting the Strategy to Work
Schafer Cullen’s International High Dividend strategies reflect the firm’s value-oriented philosophy in practice. The concentrated portfolios typically hold 30–50 positions, diversified across sectors while maintaining strict position limits to manage risk. The ADR-focused version provides accessibility for U.S. investors, while the ordinary shares version offers broader exposure to foreign markets.
Both strategies target dividend yields above 4.5% and apply rigorous fundamental research to identify companies with pricing power, competitive dominance, and sustainable dividend policies. The disciplined approach includes clear sell disciplines—whether in response to valuation targets being met, deteriorating fundamentals, or changes in dividend policy.
How Long Can International Outperformance Last?
Schafer Cullen’s research shows the average period of international stock outperformance lasts approximately 43 months. The current cycle stands at roughly 10 or 11 months—approximately 20% complete. However, Singh believes the present cycle may exceed historical averages because it follows what was likely the longest period of U.S. outperformance on record. Mean reversion may suggest a longer runway ahead.
Schafer Cullen offers its International High Dividend strategies through separately managed accounts and mutual funds, with discussions underway about a potential ETF launch. For advisors who view international exposure as a rotation trade already played out, Singh’s message remains clear: the structural opportunity—driven by valuations, diversification benefits, quality companies outside technology, improving political environments, and potential currency tailwinds—suggests the investment case has only begun to unfold.
______________________
Additional Resources
- Contact: Jeff Cullen, Jeffcullen@schafer-cullen.com
- Cullen Capital Management Website
- International High Dividend Value ADR
- International High Dividend Value ORD
______________________
Disclosures
Investing involves gains and losses and may not be suitable for all investors. Investments in foreign securities involve greater volatility including political, economic and currency risks and differences in accounting methods. Dividends are subject to change and are not guaranteed. Dividend yield is just one component of performance and should not be the only consideration for investment.
Cullen Capital Management, LLC. (CCM) is an independent investment advisor registered under the Investment Advisers Act of 1940. The views and opinions expressed are for informational and educational purposes only as of the time of recording and may change at any time. This is not an offer to buy or sell any security or strategy.
