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With
a performance like this, you might think this country was
about to go bankrupt...
You couldn't be further from the truth.
It actually saw +4.3% GDP growth last quarter, has a
per-capita GDP of roughly $30,000, and is known
the world over as a major exporter of technology products.
Despite this, its market has fallen
-46% over the
last year, making it one of the hardest-hit developed
markets in the world. Investors are
panicking since this nation relies heavily on exports -- a
slowing global economy obviously isn't a plus for the
country of 23 million strong.
But you might have missed a few other details that make
this country paradise for value investors and Shangri-La for
income seekers.
The Most Undervalued Market in the World
We've brought you stories about Taiwan before, but I don't
think I've ever seen a country as attractive to new
investment as it is today. Not even one year ago, the
country's average P/E ratio soared above 20 -- today it has
fallen all the way to
10. Compare
that to the United States where stocks still trade around
21 times earnings.
You'd expect a country's market to be trading at such a
low multiple if it were in dire financial straits. But the
fact is that Taiwan's long-term picture is about as rosy as
it gets.
Relations with China, which have been contentious since
the 1940s Chinese Civil War swept the U.S.-backed
Nationalist party to the small island in the South China
Sea, are beginning to improve.
The election of Ma Ying-jeou as president of Taiwan last
March has led to an easing of tension between the nations.
In fact, flights between Taiwan and China have now resumed
after nearly 60 years. As these two countries continually
improve their ties, the Taiwanese economy is set to boom. The Chinese people are hungry for the latest electronics
from Taiwan -- and Taiwan will be more than happy to sell
them.
This is one reason Taiwan continues to be among the
fastest-growing developed economies. This year it is seeing
roughly +4% growth -- and the next two years will see
average GDP growth of +3.5%. Yet when you compare the
current growth rate to the average P/E of 10, you get a ratio
of about 3. The same comparison for the U.S. comes in
at a much higher 11.
This is simply baffling. The U.S., a country that just
announced GDP fell -0.3% last quarter has a richer valuation
than a developed nation growing at a +4% rate.
That alone is a great reason for value investors to
look toward this nation of high-rises. But what about income
investors?
A Treat for Income Investors --
7.6% Average
Yields
Amid this sell-off, it's easy to think Taiwanese
companies would be hoarding cash and it wouldn't be a
dividend hot-spot. But the only thing this fall has done is
inflate yields for new investors.
Taiwan's benchmark TAIEX Index now yields an average of 7.6%.
But that's just an average -- we've found some stocks
yielding 10.1%,
13.7%,
even 17.3%.
Which begs the question: How can they afford to pay out
such high dividends? To be sure, the panicked sell-off
around the globe has led to increased yields -- we've been
telling you about this phenomenon for weeks. But there is
also a special clause in Taiwanese tax law that ensures high
payments.
The Taiwanese government imposes a 10% tax on any
retained earnings held by a company for more than a year. In
effect, this "use it or lose it" policy ensures the
nation's companies will continue showering investors with
dividends.
This is why even Taiwanese tech companies -- a sector
well-known for stinginess in the U.S. -- can pay out
10%-plus dividends to investors. AU Optronics (NYSE: AUO), a major player in the LCD screen
arena, pays new investors 10.1%; Silconware Precision
Industries (Nasdaq: SPIL), a company that specializes in
integrated circuit packaging, is paying 13.7%.
Now, both of these ideas have been battered, and they
still are at valuations or face challenges that make them
better suited for more aggressive investors. My favorite
play has also been hit, but at these levels, income and
value investors should be taking note.
This company trades on the Nasdaq and makes
display components for TVs, cell phones, and mobile devices --
if it has a screen, they likely had a hand in it. There is
no doubt a slowing global economy weighs on this company,
but you tell me if the punishment has fit the crime: The
stock trades at a P/E of
2.8, but it
still expected to grow +20% annually over the next five
years. On top of that, the company has zero debt and cash
per share that equals
almost one-third
of the share price. And thanks to the Taiwanese sell-off,
the stock is paying new investors
17.3% today.
There is no telling when Taiwanese stocks might begin
to turn around -- to be frank, I am not too concerned about
the timing. I know two things: Investors will eventually
recognize the value waiting on this small island nation, and
until then, I'm content to lock in some of the most
attractive yields on the planet.
If you'd like to learn more about the opportunities
awaiting investors who look around the globe for income, I
invite you to read my complimentary
High-Yield International report on the topic. In
this special feature, I'll let you know which countries are
showing average yields of more than double those found in
the U.S., where
to find T-bills that pay more than
10%, and why
exactly yields are so much higher overseas. In addition,
this report will tell you the name of the undervalued
Taiwanese stock mentioned above with a
17.3% yield.
To access your free report,
please visit this link.
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. I'll be speaking at The Money Show,
Washington, D.C. on Friday, November 7th. If you can't be
there in person, I invite you to join the live webcast
event.
Follow this link to learn more.
P.S.S.
-- Don't miss a single issue! Add our address,
Research@GlobalDividend.com,
to your Address Book or Safe List. For instructions, go
here.
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