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When
Alexander Graham Bell uttered the words, "Mr. Watson, come
here. I want to see you," he launched an industry that
continues to change the world, even today. In an age
when the latest technical innovation grabs the investment
headlines, you might overlook an industry founded on a 132
year-old technology.
But there is nothing
dated or stodgy about global telecommunications companies, which
continue to outperform the market -- while paying 8%, 10%, and even
higher yields.
Global telecoms have
delivered total returns of +125% for investors over the last five
years. What's most impressive though, is this sector's recent performance.
While domestic investors have been hammered by the subprime credit crisis, rising fuel costs,
the falling dollar and a slowing
economy, the story is just the opposite for international
investors. Foreign stocks have been on a tear, and global telecoms
have delivered some of the greatest gains.
Since the beginning of 2007, the S&P 500 Index has posted
gains of around +11%. But as the chart shows, the iShares S&P Global Telecom
Index has outperformed the S&P by a better than 3-to-1 margin
over this same time period.
Although many investors aren't aware of it, foreign dividend-paying
stocks (and global telecoms in particular)
are known for their ability to shine in less-than-sunny
markets. According to a recent report by
Merrill
Lynch, foreign dividend payers
had only a 51% correlation with the S&P over
the past ten years. This means global telecoms don't move in tandem
with U.S.
markets -- making them even more
desirable investments during periods of economic uncertainty or
market downturns (the exact type of environment we're in now).
Take Advantage of International Growth
An obvious reason for global
telecom's superior performance has to do
with the fast-growing economies they serve. Even in the best
economic times, the developed U.S. economy grows more slowly than
emerging and developing economies. And with a projected U.S.
slowdown, the International Monetary Fund projects that
a full 176 countries throughout the world will deliver stronger
economic growth than our domestic economy in 2008.
China is on target to deliver +10% economic growth this year, and India
is approaching double-digits at +8.4%. In fact, the emerging
markets and developing countries are projected to grow, on average,
more than four times faster than the U.S. this year.
As emerging markets grow, basic telecom services connect
more segments of the population. For example, as
recently as January 2008, just 24.6% of India's vast
population was estimated to have regular telephone service.
By 2010, India is projecting phone service will reach 40% of
the population, or about 500 million people. And as
disposable incomes in developing countries increase, the
demand for high-end telecom services will continue to rise.
In Brazil, for example, Internet usage is expected to grow
nearly +10% per year for the next five years.
Thanks to rising demand for both traditional phone service
in emerging markets, as well as high-end services like
Internet and wireless, global
telecoms should continue to thrive for years to come.
High Yields at Bargain Prices
But as good as the growth story is for global telecoms,
the income story is even better. These companies pay high,
dependable yields, supported by their terrific cash flow. For
instance, London-based BT Group currently pays a 5.1%
yield.
Meanwhile,
Compania de Telecomunicaciones de
Chile is dishing out a healthy yield of 6.5%. But that just represents the low side
of what you can expect -- as you'll discover in a moment, I've identified a handful of
other global telecoms paying
yields of 10% or more!
Given their safety and high income, one would probably expect global
telecom stocks to trade at premium prices. But
surprisingly enough, this sector actually trades at a steep
discount to the overall market. In fact many of my
favorite global telecoms are
selling at multiples of less than five times cash flow -- a third of
the normal 15 times cash flow for companies in the S&P 500.
Currency and
Tax Benefits
There are even more benefits to investing in global
telecoms. For one thing, these foreign
companies pay their dividends in local currency, giving you a
perfect opportunity to profit from the declining U.S. dollar.
Suppose you invested in a European stock that paid an
annual dividend of 5 euros per share. This dividend would have been
worth only $4.15 annually in 2002. But thanks to the falling dollar,
the same 5 euro dividend is now worth $7.85 -- an increase of +89%.
How many U.S. stocks have you run across that have raised their
dividends +89% since then?
Another benefit of these high-yielding foreign telecoms
is that most of their income should qualify for the reduced 15% dividend tax
rate. This makes
them a perfect choice for taxable brokerage accounts.
Safer Double-Digit Yields
Thanks to their ability to outperform in difficult markets and
thrive in the world's growing economies, global telecom stocks offer
outstanding opportunities for growth.
Even better yet, this sector also
offers some of the highest and most secure
dividend yields on the planet.
In recent months, I've profiled a
number of my absolute favorite foreign telecom stocks in the pages of my premium newsletter . . .
High-Yield
International. These include a South American
company that has skyrocketed +150% in the last five years and
currently yields 8.2%, as well as a New Zealand based telecom
that's yielding an impressive 10.3%. And thanks in large part
to the declining dollar, this high-yielding stock has boosted its
annual dividend payment from $0.58 to $1.72 per share over the past five
years -- for an impressive +196% dividend growth.
If you'd like to learn the names of
these stocks -- plus receive a steady stream of foreign stocks,
funds, global telecoms and other investing ideas with
abnormally high dividend yields each and every month -- then I'd
like to extend you a personal invitation to try my premium
investing newsletter . . . High Yield
International.
Visit this link to
learn more.
Thanks for joining me on my search for today's
highest-yielding securities!
--
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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