This Hot International Market is Trouncing Ours And Paying Double-Digit Yields
Wednesday, April 15, 2009
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This Hot International Market is Trouncing Ours and Paying Double-Digit Yields 
-- By Andy Obermueller

     While most investors can tell you that the S&P 500 has lost roughly -6% for the year, a lucky few can name the international market that has seen a +24% gain. But gains are only the beginning of what this country has to offer.

     For starters, we found a company that about to become a market leader -- in a recession resistant business -- paying a trailing 12-month yield of 20.3%.
(Full Story Below)

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For the full story, click here to view our new presentation for income investors.
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    This Hot International Market is Trouncing Ours and Paying Double-Digit Yields

     Most investors know that their stateside benchmark index yields 3.3%, which is less than a highly rated corporate bond. A small minority of investors, however, know the names of dozens of securities this hot foreign market that carry double-digit dividend yields -- payouts that easily add up to twice the triple-A's rate of interest.

     As most investors are reading dismal forecasts for domestic growth and wondering if the recession is ever going to end, a select group of well-informed international income investors are aware of this country's forecasts for outstanding growth in the years to come.

     The chart at the right shows what the forecast rate of growth for the two countries means in real terms. As you can see, this country keeps burgeoning as the U.S. struggles to gain steam.



The U.S.

















     Now, before I tell you the name of this country -- and I am going to tell you -- let me put your suspicions at ease:  This isn't some far-flung, third-world backwater.  In fact, this country -- a top international travel destination -- is home to the tenth-largest economy in the world.  It's a nation with a vibrant and diverse economy, a stable currency and a solid financial system.

The country? It's Brazil. Its Bovespa index is +30 percentage points ahead of the S&P 500.  And today, we're going to take an in-depth look at a company there that's paid dividends equating to more than a 20% yield during the past 12 months. 

     The best part about this company is that it trades in the U.S., which means you can add the shares of this river of revenue to your portfolio today. Brazil offers better returns, higher dividends, better economic prospects in a stable investing climate that you can access from your laptop.  What more could an investor ask for?

     How about lower taxes? Done!  Before we go on, I want to make sure you're crystal-clear on U.S. tax policy.  You see, many of the (admittedly excellent) companies that pay super-rich dividends in this range aren't "companies" at all.  At least not in the traditional sense. 

     Instead of being structured as corporations, they're usually organized as trusts. That means they must pay almost all of their earnings directly to shareholders.  But here's the rub: Trusts themselves pay no taxes, but their owners do. So, as a trust owner, you could be on the hook for up to 35% of your trust dividend income!
     That's not the case with this company.  Its dividends are, in fact, dividends, and they will be taxed at the 15% rate.  That means you get to keep more of your money.  Lesser taxes, better return, period, amen.  Just so we're clear. I want you to understand completely so you can fully appreciate the advantages of this investment.

     A Utility for Income and Growth

     The company is one of Brazil's largest telecom concerns. It provides traditional wireline as well as wireless, data and broadband-Internet services. The company has 36 million customers, including about 21 million wireless subscribers, and it's about to get bigger. That's because it's buying a competitor, and the resulting company will be the largest telecom player in Brazil.

     This company is the main phone provider in the area that includes Rio de Janeiro, Bahia and 14 other states. The region covers 55% of Brazil's population and accounts for 40% of the country's GDP. Though it faces competitive pressures -- like all phone companies -- revenue was expected to grow about +6% in 2008. When any utility can grow its revenue at a faster clip than the annual growth in GDP, you know you're looking at a vibrant company. All in all, this firm commands a third of Brazil's wireless market. It has been growing its market share, and the upcoming merger will bolster performance.

     The dividend is centered on a modest annual payment but is supplemented with a special dividend several months later. In February, it paid a special dividend of US$1.307 a share, and in the past 12 months it has paid shareholders a total of US$3.13 -- giving the stock a trailing 12-month yield of 20.3%.

     Now, to be fair, the merger will have some costs and that payout rate might be a stretch for the year ahead. However, High-Yield International Editor Nick Lanyi recently wrote that he foresees a reduced, but still robust, annual payout, and he added the shares to his "Ultra High-Yield" Portfolio.  

     Many happy returns --

- Andy Obermueller
Global Dividend Opportunities
839-K Quince Orchard Blvd. 
Gaithersburg, MD 20878-1614

P.S. This isn't the only Brazilian high-yielding stock Nick likes. He recently profiled two others -- both with yields over 10%. To read more about these companies -- and to learn more about the kind of valuable international income information you can find in the High-Yield International newsletter, please visit this link

P.S.S. -- Don't miss a single issue! Add our address,, to your Address Book or Safe List. For instructions, go here.

Income Notes

Federal Reserve Chairman Ben Bernanke says there are signs the "sharp decline" in the U.S. economy is slowing. "I am fundamentally optimistic about our economy," Bernanke said in prepared remarks for a speech today. "Today's economic conditions are difficult, but the foundations of our economy are strong, and we face no problems that cannot be overcome with insight, patience and persistence."

-- Bloomberg

Before GE lost its top-notch credit rating, the average triple-A bond yield was about 10%. Those deals have evaporated, though a few bond are still offering an enticing rate of return. The composite rate on a 20-year "AAA"  bond is 6.40%. There are some signs that opportunity will be fleeting, too: The rate was 6.53% last week and 6.79% a month ago.

-- Andy Obermueller

Capture a 19.2% Yield Backed by the Federal Government

It borrows cheap, collects higher and pockets the spread. Simple, but elegant -- and the shares pay a rich 19.2% yield. In our special presentation, we outline another pick that also paid 19% last year... plus threw in another +34% in capital gains.

For the full story, click here to view our new presentation for income investors.

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