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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.
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|
Year |
??? |
The U.S. |
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2008 |
5.1% |
1.1% |
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2009 |
-1.5% |
-3.1% |
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2010 |
2.7% |
0.7% |
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2011 |
4.0% |
1.5% |
|
2012 |
4.0% |
1.9% |
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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
Co-Editor
Global Dividend Opportunities
GlobalDividends.com
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,
Research@GlobalDividend.com,
to your Address Book or Safe List. For instructions,
go
here.
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