Global income awaits.
While dividend investors are prone to stick to known domestic companies, the reality is many entrenched U.S. stocks are not exactly the safest bet in the world these days. Think of General Electric Co. (ticker: GE), which slashed its dividend three times, or Kraft-Heinz Co. (KHC), which also cut distributions to handle massive debt that financed a merger. In contrast, there are lesser-known stocks in emerging markets that may seem more risky, but in fact are developing a strong history of delivering shareholder value through consistent — and growing — dividends. If you’re not afraid to look outside the U.S. for income, here are seven emerging markets income plays.
In 2000, Ambev was formed in the merger between a big Brazilian brewer and a competitor in Argentina. The result is one of the largest beer producers in the world, with ABEV boasting a $70 billion market capitalization and almost $14 billion in annual sales. In addition to brewing local beers like Brahma, Ambev is also licensed to produce brews U.S. consumers will recognize, including Stella Artois, Budweiser and Modelo. It also bottles soft drinks such as Pepsi (PEP) and Gatorade. With a rising middle class, these strong consumer brands are connecting in a big way and driving a generous dividend.
Current yield: 5.2 percent
AU Optronics Corp. (AUO)
AU Optronics is a specialized electronics company that produces LCD displays and flat panel display technology. The company also operates a solar materials division that markets solar wafers and solar modules, as well as technical engineering and maintenance services for solar projects. AUO may not have the amazing margins of an innovative tech company like Apple (AAPL), but it is a key supplier for consumer product companies to bring flashy TVs or tablets to the market. It’s also a key supplier for solar panel installers worldwide on both residential and commercial projects. That gives it a reliable revenue stream from many customers, fueling a generous dividend via twice-annual paydays.
Current yield: 10 percent
China Mobile Ltd. (CHL)
As the largest mobile telecommunications corporation in the world, CHL boasts a market cap of more than $220 billion and a staggering 900 million subscribers. (By way of comparison, there are only about 330 million people living in the United States.) Just as domestic telecom providers are reliable sources of dividends, so is China Mobile. The difference, of course, is that its subscriber base is more massive and it still has room to grow as the emerging market of China gets increasingly connected. The fact that CHL also has the blessing of Beijing means that competition is not a problem and this entrenched telecom is safe for long-term investors.
Current yield: 4 percent
CNOOC Ltd. (CEO)
CNOOC Ltd. is a major subsidiary of China National Offshore Oil Corp. and is China’s largest offshore producer of oil and natural gas. While fossil fuels aren’t quite in demand the way they once were in the West amid a push for renewable energy, there’s still strong baseline demand across Asia — and a big need for CNOOC to keep pumping. Revenue is down a bit from five years ago, as $100 oil seems to be a thing of the past. But lately, crude has firmed up to around $60 and that has delivered more profits and robust dividends to shareholders.
Current yield: 4 percent
Companhia Siderúrgica Nacional (SID)
As Brazil’s largest integrated steel producer, SID is a cyclical play on construction throughout South America. After suffering one of its worst recessions in decades, GDP returned to growth mode in 2018 and that bodes well for materials stocks. As a commodity stock, some volatility is the norm based on demand as well as pricing on global metals markets. However, SID is comfortably profitable and has a long history of delivering shareholder value via dividends — even if the payouts do fluctuate significantly annually, as is typical of many international dividend payers.
Current yield: 3.8 percent
A mid-sized insurance company in China, Fanhua offers a variety of casualty and property policies. As the nation continues to grow and prosper, more people are seeing the value of protecting themselves with disability insurance and life insurance as well homeowner and vehicle insurance policies to protect their property. This is generating decent performance for the insurer, with more than $500 million in total revenue. And like more developed insurers in the West, there is also a reliable revenue stream from policy premiums fueling a stable dividend payout.
Current yield: 3.9 percent
Infosys Ltd. (INFY)
Infosys provides consulting, technology, and outsourcing services. While there is some negative sentiment in North America and Europe with the notion of sending service jobs to India, the bottom line is still the bottom line for many corporations — and that means Infosys is doing a brisk business. The company boasts clients in 45 countries, tallying more than $11 billion in annual revenue. INFY is still growing, too, with revenue set to expand 8 percent this year and another 8 percent next year to boot. That makes for a nice combination of growth and income.
Current yield: 3 percent
Emerging markets stocks to buy for dividends.
Here are seven companies in emerging markets that are worth a look by dividend investors:
— AmBev (ABEV)
— AU Optronics Corp. (AUO)
— China Mobile Ltd. (CHL)
— CNOOC Ltd. (CEO)
— Companhia Siderúrgica Nacional (SID)
— Fanhua (FANH)
— Infosys Ltd. (INFY)
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