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Wednesday, September 3, 2008
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Discover This
12.2% Yield 'Hidden' Among One of the
World's Fastest-Growing Markets |
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-- By
Nick Lanyi
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The world's fifth-largest country is often overlooked or
underestimated. But Brazil's white-hot economic growth has powered its
stock market nearly +1,000% higher during the past five years. That
expansion is expected to continue, and Brazil represents one of the
most promising destinations for investors.
In today's issue, I'll show you how to profit from Brazil's boom by
capturing high yields and strong returns with Brazilian stocks.
I'll also introduce you to a fixed-line telecommunications company there that has
been cashing in on the country's economic boom -- and
is paying a fat 12.2% dividend yield.
(Full
Story Below) |
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Discover This 12.2% Yield 'Hidden' Among One of the World's
Fastest-Growing Markets
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Would you believe the map the world has used for five
centuries -- is wrong?
The most common map of the earth, the Mercator
projection (see below), shows Greenland as about the same size as
Africa. It depicts Europe as large as South America. But
these are distortions caused by projecting the surface of a
globe onto a two-dimensional rectangle. The
"so-called" Peters Projection, right, accurately shows that Africa
is actually 14 times larger than Greenland. And it realistically
depicts South America twice as large as Europe.

We'll let cartographers debate which map is better. But
the discussion nevertheless raises a crucial question. Have
investors misjudged the size and importance of South
America?
Have you?
South America is dominated by Brazil, a country most
people don't know much about. Some may vaguely associate it
with coffee . . .
But Brazil is almost the same size as the United
States. It's the largest nation in South America, touching
every country on the continent except Chile and Ecuador. Its
diverse economy is supported by agriculture, mining,
manufacturing and services.
In fact, that economy ranks 10th in the world. That's
larger than the economies of Russia, India, Australia and
Mexico.
And Brazil's $1.8 trillion economy is still growing --
fast. Brazil is expected to expand +5.4% this year -- adding
some $100 billion worth of goods and services. That's
roughly the same total dollar growth as the United States
will see this year.
Brazil is forecast to continue this rapid economic
expansion at an average +4.1% annual clip through 2012. The U.S. will be
fortunate to grow half that fast.
So I'll repeat my question: Have investors misjudged Brazil's
size and importance?
Now, economic growth is interesting enough, but it's
just a statistic -- unless you tie it to what it can mean to
your money. Think about what's going on here at home. The
economy has slipped. And the major U.S. market indexes are all
negative for the year. That's what slow or no economic
growth can do to a country's stock market.
But let's see what happens to investors' profits in
markets where economic growth is strong. You might want to
sit down for this part -- it's arguably the most dramatic
investing story of the decade:
For the five years ended Dec. 31, 2007, Brazil's
benchmark Bovespa Index rose +966.5%.
That's not a typo.
That statistic comes from Bloomberg, a research tool
available only to financial professionals, which is
considered all but infallible in the collection of market
data.
What about India and China? They couldn't keep pace. Bloomberg data shows the Bombay 500 Index rose +778.2%
during this same time period. Meanwhile, the Shanghai benchmark index was up
+351.7%.
Brazil beat them both -- hands down.
Capturing Double-Digit Yields in
Brazil
Brazilian stocks have been on a tear in recent years,
and thanks to strong economic growth and high commodity prices
(Brazil is one of the world's leading exporters of
agricultural goods and natural resources), I expect those
gains to continue.
But if you're an income investor, then growth alone isn't
enough. Income investors need to lock in both steady growth
AND an above-average dividend stream.
It's certainly possible to lock in high yields by investing in
Brazil. Just look at the numbers: The average dividend yield of
the Bovespa Index
-- 3.04% -- is significantly higher than the S&P 500's 2.34% yield. But
those are only averages.
Now, truly outstanding yields are much more elusive. In
fact, only 6 in 100 publicly traded companies in Brazil pay
dividends higher than 7%. But of those high-yielding companies, the
average stock yields an impressive 11.9%! And though most of these companies are
highly reputable corporate enterprises, few Americans
even know they exist.
In recent months, I've uncovered
high-quality Brazilian stocks with dividend yields of 7.5%, 8.7% and 9.4%. These aren't merely respectable yields,
they're downright enviable. But in the pages of my
premium monthly newsletter -- High-Yield International
-- I set my standards a
little higher. After hundreds of hours of in-depth
research, I recently discovered a fast-growing Brazilian telecommunications company with a 12.2% yield.
That's the sort of
commitment to high yields you need as an income investor. But
information on foreign countries -- and certainly on the
highest-yielding stocks in those nations -- can be hard to find. Until now.
My premium High-Yield International newsletter scours the
globe for its most profitable income investments. One of
my favorite plays in the region is a Brazilian
telecommunications company that serious income investors
should consider immediately.
The company I've discovered offers:
A Strong Yield -- In the past 12 months, this
stock has paid $3.36 per share in dividends, giving it a yield of 12.2%.
Price Appreciation -- The shares are downright
cheap, trading at less than
ten times analysts' consensus earnings estimates for 2008. If the stock reverts to
historic valuation levels, investors could enjoy total returns of +30%
or more during the
next 12 months.
Currency Advantage -- Shareholders receive
dividends in dollars, but the payout is established in Brazilian reals. When the real gains
strength, it buys more dollars, leading to bigger dividend
checks for U.S. investors. (The real is already up +5.9%
vs. the dollar since Jan. 1st.)
This well-positioned company has been taking advantage
of Brazil's boom from day one. It's centered in the state of
Sao Paulo, where much of the country's population lives.
Residential and business customers in this market are heavy
telecom users. And the telecom industry is a cash cow --
the company has paid $2.8 billion to its
shareholders in the past two years. It's also moving into
broadband to fuel continued growth, and thanks to its
success in this market, its fat dividend payouts should
continue for years to come. Learn more about this stock here.
High yields . . . price appreciation . . . currency
benefit. This is the trifecta of international investing. And this is the sort of international market intelligence
that my High-Yield International subscribers have at their
fingertips.
When you join my exclusive roster of savvy income investors,
you'll have a clear map. My research staff and I have never misjudged Brazil's size
or its importance. Readers who ventured into Brazil
all the way back in
2004 based on our initial recommendations have profited handsomely.
These subscribers receive clear direction when it comes to countries with
the highest, safest and most dependable dividend payouts in
the world.
My Brazilian telecom pick, with its 12.2% yield, is just one stock
that offers all of the benefits of international
investing. Join my High-Yield International
service now and you'll discover
dozens of opportunities that provide a winning combination
of high yields, price appreciation and strong currency
benefits. Visit
this link immediately to learn more about my favorite
Brazilian high-yielder, as well as a select basket of other
international markets that are not only growing at a fast
clip, but are also loaded with double-digit dividend payers.
Thanks for joining me on this week's journey.


--
Nick Lanyi
Co-Editor
Global Dividend Opportunities
GlobalDividends.com
839-K Quince Orchard Blvd.
Gaithersburg, MD 20878-1614
P.S.
-- Don't miss a single issue! Add our address, Editors@GlobalDividends.com,
to your Address Book or Safe List. For instructions, go
here.
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Income
Notes
PET bonds are one of the most overlooked investments in the
income universe. They emerged over the past decade to make bonds
easy to access for income investors. They're corporate bonds
packaged into affordable $25 units. They trade under a ticker
symbol, and you can buy and sell them like stock throughout the
trading day.
-- Carla
Pasternak,
High-Yield Investing |
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The China Securities Regulatory
Commission is considering a plan to cut or cancel the tax on
dividends paid to shareholders as part of efforts to reduce
volatility in the country's capital markets. No timeline has
been set yet.
--
The Wall Street Journal,
Aug. 29, 2008 |
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