With the Australian currency down and buying just 89 cents to the US dollar it would appear the long held view of many economists that our currency's exchange rate will revert back towards a level more in line with its long-term average is now well and truly underway.
Reversion to the mean is a strong force but of course currency moves are incredibly difficult to predict.
If you share the view that the Aussie dollar is likely to trend lower then it could make strategic sense to position your portfolio for exposure to companies that earn US dollars and which stand to benefit from a lower exchange rate.
Two stocks which should fit that bill are Amcor Limited (ASX: AMC) and Brambles Limited (ASX: BXB).
According to data provided by Morningstar, Amcor is forecast to pay a dividend of 44.8 cents per share (cps) in FY 2015, rising to 47.9 cps in FY 2016. With the share price last trading at $11.08 this implies a FY 2016 unfranked yield of 4.3%.
In contrast, Brambles is forecast to pay a dividend of 30.3 cps in FY 2015, rising to 32 cps in FY 2016. Shareholders also benefit from around 30% franking of their dividends. With the stock price at $9.69, this implies a partially franked yield of 3.3%.
More than meets the eye
While on first glance investors may think Amcor is the more appealing income stock, there are reasons to favour Brambles.
First, while Amcor earned approximately 30% of its revenues in the USA in FY 2014, Brambles earned 48% of its revenues from the Americas. This suggests Brambles is a more leveraged play on the US dollar which could lead to upside revisions for dividend expectations if the currency continues to decline.
Second, once Brambles' dividend is grossed up for the franking, the difference between the two yields declines.
