The Ten Most Profitable Companies in Asia

Asia has two of the most populous countries of the world – China and India. They are also among the largest emerging markets in the so-called BRIC countries. Some of the countries in Asia are showing signs of recovery. For example, the Shanghai Composite Index has grown by 27% year-to-date until last Friday due to the Chinese government’s efforts to stimulate the economy. A Marketwatch news report on Feb 13 said “Loans extended by banks rose to a record 1.62 trillion yuan ($237 billion) in January, accelerating from 771.8 billion yuan issued in December, according to data released Thursday by the People’s Bank of China.”

In addition to China and India, the former “Asian Tigers” of Singapore, Taiwan, Hong Kong and South Korea are also in Asia. Singapore has become the new “Switzerland of Asia” due to its favorable status as a off-shore banking haven. Besides these countries, Japan – one of the top economies in the world, is also in Asia. The oil-rich Middle East countries hold some of the largest sovereign wealth funds in the world. On the political front, China is a community country but follows a unique type of economic system called “Market Socialism”(capitalist market with communist political system). India is the largest democratic country in the world. Except Israel, most of the Middle Eastern countries are monarchies. So overall Asia is an interesting continent to monitor with its different types of economies and political systems. From an investment perspective, my research to identify the top 10 companies led to the FinanceAsia.com site which publishes the top 100 companies in Asia.

The following is a brief overview of the Ten Most Profitable Companies in Asia:

1. PetroChina Co. Ltd. (PTR) is an integrated oil and natural gas company in China. All of of its production-related assets located in China. PetroChina had a total revenue of $159B last year. The P/E is 7.15 and the dividend yield is 4.65%. Annual EPS in the past 5 years increased by 23%. Currently S&P has a “Five-Star” rating on PetroChina.

2. HSBC Holdings PLC (HBC), one of the largest banks in the world, pays a dividend of 10.23%. HSBC is incorporated in the UK but FinanceAsia lists it in the top Asian companies since HSBC has huge operations in Hong Kong. HBC is currently not an investor’s favorite since its a bank stock.

3. Samsung Corp(OTC: SSDIF) is a top digital equipment and home appliance maker from South Korea. In the US, the stock is thinly traded on the OTC market. Samsung does not pay a regular dividend.

4. A provider of mobile telecom services in mainland China and Hong Kong, China Mobile Limited (CHL) has a subscriber base of 399.5 as of August, 2008. CHL has a profit margin of about 27% and the annual earnings growth is 17%. The market cap. is $178.9 B and the yield is 3.84%.

5. China Construction Bank Corp. trades on the OTC market with ticker CICHY.

6. Sinopec Shanghai Petrochemical Co Ltd (SHI) is another petrochemical company in China. The current yield is 5.39%.

7. Industrial and Commercial Bank of China is not listed in the US markets.

8. Bank of China (3988.hk) trades in the Hong Kong Stock Exchange.

9. One of the world’s largest integrated steel producer is POSCO (PKX) of South Korea.Due to the collapse in steel prices PKX has fallen 59% in in the past 52 weeks. PKX does not pay regular dividends.

10.India-based Oil & Natural Gas Corporation(ONGC.NS) trades on the New Delhi Stock Exchange.

Top Ten Global Personal Care Products Makers

Personal Care Products include items that we use on a daily basis. Some of the items in this group are hair care products, deodorants, detergents, toothpaste, skin care products, band-aids, baby diapers, tissue, etc. Some of these products are necessities and consumers buy them even when the economy is down. This is one reason why stocks in this sector are good picks to ride out a recession.

In order to identify the Top 10 Companies in the Personal Care Products business I used Computerwire’s DataMonitor list. The following top ranking companies were selected based on their 2007 personal care product revenues:

Rank Company Ticker Country Yield
1 The Procter & Gamble Company PG USA 2.60%
2 LOreal S.A. N/A France N/A
3 Unilever PLC UL UK 3.01%
4 Johnson & Johnson JNJ USA 3.24%
5 Kimberly-Clark Corporation KMB USA 4.06%
6 Colgate-Palmolive Company CL USA 2.55%
7 Svenska Cellulosa Aktiebolaget N/A Sweden N/A
8 Kao Corporation N/A Japan N/A
9 Estee Lauder Companies Inc EL USA 2.03%
10 GlaxoSmithKline Plc GSK UK 5.65%

Note: Companies whose stocks are not traded in the USA are marked with N/A.

Brief Overview:

1. The Procter & Gamble Company (PG) is a Cincinnati,Ohio USA based Fortune 500 company that manufactures a wide range of consumer products and markets them in over 180 countries. P&G owns many of the world-class brands like Gillette, Olay, Pampers, Bounty, Duracell, Vicks, Folgers Coffee, Crest etc. PG has an yield of 2.6% and a P/E of 16.4. Total Revenue in 2007 was $85.0B. In the last 5 year, annual EPS growth was 14.5%.

2.Unilever PLC (UL) is one of the parent companies of the Unilever Group. Another company is Unilever N.V. (UN) based in Holland. Some of Unilever’s brands include Brooke Bond Tea, Ponds, Ben & Jerry’s, Slim Fast, Bertolli, Ragu, Lipton,Close-up, Dove, Thermasilk, etc. UL pays a dividend of 3.01% and the P/E is 10.98%.

3. Johnson & Johnson (JNJ) is a great American company with a wide range of products in its portfolio. JNJ is also a Dow Jones Industrial Average component. Some of JNJ’s brands are Acuvue, Band-Aid, Nicorette, Tylenol, Neutrogena, Shower to Shower, etc. S&P has a 5-star rating on JNJ. In the past 52 weeks JNJ is down just 16%. Annual dividend growth rate is 15%. In 2007, total revenues were $64.5 B.

4. Another global health and hygiene products maker is Irving, Texas-based Kimberly Clark Corp (KMB). The company makes many paper-based products including Kleenex, Cottenelle, Huggies, etc.

Total Revenues in 2007 was $19.6B. The P/E is 13.89 and the yield is 4.06%.

5. Colgate-Palmolive Company (CL) is a USA-based multi-national company that is famous for the Colgate tooth paste brand worldwide. Colgate owns brands like Ajax, Colgate toothpaste, Fresh Start, Palmolive soap, etc. Similar to JNJ, CL is also a 5-star rated stock by S&P. The current yield is 2.55% and the P/E is 17.93. Annual EPS growth rate in the past 5 years is 8%.

6.New York City, USA-based Estee Lauder (EL) is a manufacturer and marketer of skin care, fragrance and hair care products. Owned brands include Estee Lauder, Aramis, Clinique, American Beauty, Donna Karan,etc. EL has a dividend yield of 2.03%.

7. Incorporated in United Kingdom, GlaxoSmithKline Plc (GSK) is the world’s second largest drug company but also manufactures oral hygienic products, nutritional drinks, etc.GSK is a multi-national corporation with its products being sold in over 140 countries. GSK is a component of the FTSE 100 Index. Some GSK’s brands are Tagamet, Flonase, Aquafresh, etc.

The other companies in the above list Svenska Cellulosa Aktiebolaget, Kao Corporation and L’Oreal S.A. do not trade in the organized exchanges in the USA.

The Largest German Companies

The Brandenburg GateThe German economy is the largest in Europe and the third largest in the world. The country attracted EUR 439 B Foreign Direct Investment (FDI) in 2006. With a high productivity rate and a world-class education system Germany ensures that its citizens high standards of living. Germany is also the number one for research and is Europe’s largest logistics market. Decreasing labor costs and corporate tax levels have created an investor-friendly economy.

Photo: The Brandenburg Gate,Berlin

Some of the world’s leading companies are based in Germany. To identify the largest companies in Germany I used the main stock market index in Germany- the DAX.The DAX contains the 30 largest and most liquid stocks traded in the Frankfurt Stock Exchange. The DAX is a performance-based index. All dividends,stock splits and other events on the index components are rolled into the index. The 30 stocks represented in the index are the blue chips of Germany.

DAX Index Components (stocks trading in the US have tickers noted)

Company Ticker Sector
Adidas AG ADDDY Sports Apparel Maker
Allianz AZ Insurance
BASF BASFY Chemicals
Bayer AG BAYRY Chemicals
BMW N/A Automative
CommerzBank CRZBY Banking
Continental AG CTTAY Auotmobile Parts
Daimler AG DAI Automative
Deutsche Bank DB Banking
Deutsche Borse N/A Stock Exchange
Deutsche Lufthansa N/A Airlines
Deutsche Post N/A Logistics
Deutsche Postbank N/A Banking
Deutsche Telekom DT Telecom
E.ON EONGY Utility
Fresenius Medical Care N/A Healthcare
Henkel HENKY Household Products
Hypo Real Estate N/A Commercial Real Estate
Infineon Technologies IFX Semiconductor
K+S N/A Chemicals
Linde AG N/A Chemicals
MAN AG N/A Enginnering Equipment maker
Merck AG N/A Pharmaceuticals
Metro AG N/A Retail stores
Munich Re N/A Reinsurance
RWE RWEOY Utility
SAP AG SAP Software
Siemens AG SI Engineering
ThyssenKrupp N/A Industrial Conglomerate
Volkswagen AG N/A Automative

Overview of German stocks listed above:

1. Adidas trades on the OTC market(Pink Sheets) with ticker ADDDY. It develops and markets a wide range of sports products.Adidas owns the Reebok brand famous for footwear. ADDDY is thinly traded and is down about 53% year-to-date.

2.Allianz (AZ) is a financial services provider with main focus on the property and casualty insurance business with more than 60 million customers in 7 countries. The current yield is 11.40% and the P/E is 5.17. Over the past 5 years, the dividend growth rate has been about 30% annually.

3.The world’s largest chemical giant BASF AG (BASFY) operates under more than 300 subsidiaries and affiliates. BASFY trades on the OTC market. The current yield is 9.11% and the stock is down about 50% in the last 52 weeks. The annual revenue growth in the last 5 years is 15.78%.

4.Bayer AG (BAYRY) is listed in the OTC market. Bayer operates in three divisions: HealthCare, CropScience and MaterialScience. BAYRY has a dividend yield of 3.80% and the earnings growth has been negative in recent years due to many issues in its drug business.On Oct 28th the FDA sent warning letter to Bayer for illegally marketing aspirin drugs.

5. Frankfurt-based CommerzBank (CRZBY) is a regional bank and trades on the OTC.Due to severe losses from exposure to sub-prime crisis in the US, the stock is down 73% in the last 52 weeks.In September, Commerzbank announced that it plans to acquire Dresdner Bank for $14.4 B to compete Deutsche Bank, Germany’s largest bank. The current yield is 14.48%.

6. Continental AG (CTTAY) is an auto parts supplier and is listed in the OTC market. It operates in six divisions: Chassis & Safety, Powertrain, Interior, Passenger and Light Truck Tires, Commercial Vehicle Tires, and ContiTech.Annual EPS has increased at 32% in recent years and the yield is 7.43%.

7.Daimler AG (DAI), formerly DaimlerChrysler AG operates in four divisions: Mercedes-Benz Cars, Daimler Trucks, Daimler Financial Services and Vans, Buses.DAI pays a dividend of 7.35%. Earnings growth has been flat in the past few years and is likely to get worse due to the recession.

8. The global German Bank, Deutsche Bank(DB) reported billions in write-downs due to bad loans and investments in mortgage-backed securities. DB has lost 70% of its value in the last 52 weeks. The current yield is 11.85%. On October 31, DB reported that profits fell 73% in the 3d quarter and signalled that the dividend for 2008 will be lower than the dividend paid in 2007.

9. Deutsche Telekom(DT) is an integrated telecom provider. DT owns the T-Mobile cellphone network in the USA. DT pays a dividend of 8.14%.

10.The multi-utility E.ON(EONGY) trades in the Pink Sheet market.E.ON provides natural gas and electricity to customers in Germany,Netherlands, Hungary, Slovakia, the Czech Republic and Switzerland. EON has a yield of 5.53% and the total revenue increased in 5 years.

11.Henkel(OTC: HENKY) makes household products like detergents, fabric softeners, laundry conditioning products, dishwashing products and all-purpose cleaners, hair shampoos and conditioners, bath products, deodorants,etc. Henkel pays a dividend of 3.28%. Some of its brands include Dial soap,Purex detegent,Duck Tape,etc.

12. Siemens spun-off its semiconductor chip business to form Infineon Technologies AG(IFX) a few years ago. The beta for IFX is 2.3 and its does not pay a dividend.

13.RWE AG(OTC: RWEOY) is a multi-utility competing against E.ON. The current yield is 6.05% and the annual earnings and dividend growth rate is 23%.

14.One of Europe’s largest software companies is Germany-based SAP AG(SAP). The annual growth rate is 32% .SAP is one of the few IT companies to pay a dividend. Dividend yield is 2.18%.

15.The world-renowned company Siemens AG(SI) is engaged in electrical and electronics engineering with operations in over 120 countries. SI pays a dividend of 3.90%. From a 52-week high of $160 the stock has fallen to $44 last month and recovered to close at $60.15 yesterday Oct 31st.

More German stocks listed in the US can be found here.

The Top 10 Global Food Stocks

VeggiesInvestors are attracted to defensive sector stocks for their stability and consistent growth.One of the defensive sectors is the food producers. Some of these stocks have held up well during the past few months.

In this post lets review the Top Ten Global Food Producer stocks. This ranking is based on the total revenue generated in 2007 by each food producer and was compiled by a company called DataMonitor. Seven out of the top ten are US companies.

The Top 10 Global Food Companies

Rank (based on 2007 Revenues) Company Ticker Year-to-Date Change
1 Nestle SA NSRGY -18.67%
2 Cargill Inc N/A N/A
3 Kraft Foods Inc KFT -14.70%
4 Unilever UN -37.05%
5 Tyson Foods Inc TSN -36.60%
6 Pepsico Inc PEP -30.60%
7 General Mills, Inc GIS 15.80%
8 Groupe Danone GDNNY -41.55%
9 Kellogg Company K -6.30%
10 ConAgra Foods,Inc GAG -27.50%

1.Nestle SA (NSRGY) is the largest food producer in the world. Nestle’s brands covers all food and beverage types.Some of the famous Nestle brands include KitKat,Nescafe,Hot Pockets,Dog Chow & Purina(Pet Foods),etc.The stock is one of the most traded on the OTC market and pays a dividend of 3.09%.

2.Cargill Inc is a privately-held company.

3. The USA-based Kraft Foods Inc. (KFT) operates sells its products in more than 150 countries.Kraft was spun-off from Altria Group. Kraft has an yield of 4.28% and the annual dividend growth over the last 5 years is 13.18%. The profit margin is only 6.15% and the beta is 0.6. Some of Krafts brands are Oreo, Ritz, House,Planters, Easy Mac,etc.

4.Unilver NV (UN) is an Anglo-Dutch multi-national company with operations in 100 countries and owns over 400 brands in foods,beverages, cleaning agents and personal care.Some of the famous brands are Lipton,Knorr,Ben & Jerry’s and Breyers Ice-creams, Dove, Rexona, Slim-Fast,etc. Unilever pays a dividend of 6.74% Profit margin is 10.57%, better than Kraft Foods Inc.Annual dividend growth over the last 5 years is 21.42%. Unilever’s UK division trades with the ticker UL in New York Stock Exchange.

5.Tyson Foods Inc (TSN) produces and distributes meat and poultry products. TSN has a low dividend yield of 1.66% and over the last 5 years revenue growth has been flat.The company is below average in managing their resources and hence Return on Assets,Revenue per Employee, Return on Equity are all below it’s peers.

6.PepsiCo Inc (PEP) is a global beverage and snack company based in the USA.PepsiCo’s brands owns hundreds of brands including Quaker Oats, Pepsi,Gatorade,Lay’s Potato Chips,Diritos,Tropicana,AquaFina, etc. The current yield is 3.28% and the profit margin is 13.26%. Earnings have grown at15.38% annually over the last 5 years and it has raised dividends by 19% annually in the same period.

7.Minneapolis,MN-based General Mills, Inc (GIS) is a manufacturer and marketer of many consumers foods including Cheerios,Wheaties, Pillsbury,Haagan Daas Ice Cream,Betty Crocker,Progresso,etc. GIS has a dividend yield of 2.68%.The profit margin is 8.28% and earnings have grown annually at 8.86%.

8.Based in Paris,France Groupe Danone (GDNNY) is a producer of fresh dairy products, biscuits,cereals,etc. Some of its brands include Evian water,Activia and Dannon,Danone yogurts,etc.The OTC market listed GDNNY’s dividend yield is 3.21% and the profit margin is 9.91%. Danone’s yogurt lines are a favorite among female consumers due to health benefits.

9. Kellogg (K) is a leader in the manufacture and marketing of cereals and convenience foods. K pays a dividend of 2.82% and the average annual earnings growth rate is 9.5%.Some of its competitors are Heinz,General Mills,Campbell Soup Inc. Kellogg’s products are sold in more than 180 countries and some of its brands are Pop-Tarts,Froasted Flakes,Special K,Graham Crackers,Keebler Cookies,etc.

10.The USA-based ConAgra Foods(CAG) company is a leading packaged food company with many brands such as Healthy Choice, Chef Boyardee, Egg Beaters, Hunt’s, Orville Redenbacher’s, PAM,Reddi-WIP, etc.The current yield is 4.52% and the revenue growth over the past 5 years is 12.85%. The dividend yield paid is in-line with its peers in the food-processing industry.

Disclosure: Long GIS

Hi Dividend Yield, Hi Dividend Growth Rate Foreign Stocks

For the long-term investor looking for dividend stocks in this market there are plenty of opportunities at attractive prices. Financials is one of the worst affected sectors due to the sub-prime crisis. Some of these financial stocks have fallen over 50% since past October. However in my opinion some of the European banks have become cheap and are decent picks at the current levels.

Traditionally European banks have paid higher dividends. While higher yield is good, it is also important to review the payout ratio and the annual dividend growth rate. These two factors give a better picture about a particular dividend stock than just the yield alone. So I have compiled the following list of European bank stocks (ADRs) with the dividend yield, dividend growth rate and the payout ratio listed for each stock.

Some of the reasons why European banks are better than US banks are:

1. Except UK and to some extent Spain, the housing market has not crashed in other countries. In countries like Germany it is not easy to get a residential mortgage since most banks follow traditional banking practices.

2.UK seems to be an exception in that it loosened some of the lending laws for mortgage loans similar to US. Besides property prices in UK have risen for many years since there is belief that being an island, land is limited and demand is always high.

3. Many banks in Europe actually own the loans they originate and do not get involved heavily in derivative instruments.

4. Some of the banks that have had losses have shored up their capital base to weather the current credit crisis.

5.Banks from the former superpowers tend to have long established ties and strong presence in the colonial countries. For eg. – British bank Barclays operates in many Caribbean countries and India, the jewel in the crown during the empire days.

6.In this years ranking of “The Top 50 Banks in the World” in terms of assets held
European banks dominate the top 9 positions. (Source: www.BankersAlmanac.com)

A) European Banks – Dividend Yield, Dividend Growth Rate and Payout Ratios

Bank Ticker Dividend Yield Annual Dividend Growth Rate (past 5 years) Payout Ratio Country
ING Groep ING 7.04% 8.82% 28.00% The Netherlands
Deutsche Bank DB 7.42% 35.05% 30.00% Germany
Banco Bilbao Vizcaya Argentaria BBV 6.34% 15.28% 31.00% Spain
Banco Santander, S.A. STD 5.06% 17.67% 29.00% Spain
Bank of Ireland IREC 14.47% 11.44% 23.00% Ireland
Allied Irish Banks AIB 7.43% 8.68% 32.00% Ireland
Barclays PLC , London , UK BCS 6.99% 13.13% 56.00% UK
HSBC Holdings plc HBC 4.74% 1.42% 52.00% UK
Llyods Bank LYG 8.18% 0.97% 60.00% UK
The Royal Bank of Scotland Group plc RBS 22.39% 17.91% 45.00% UK

Corrections- Please note the following updates that will be made tomorrow for the above table:
1.Bank of Ireland’s ticker is IRE not IREC.
2. LYG has yield of bout 13%.
3.The yield for RBS is not 22.39% as the above table says. This is an error and will be fixed tomorrow. Thanks for your understanding.
B) Chart

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Click on the chart to enlarge.
C) Payout Ratios Chart

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Analysis:

1. Deutsche Bank annual payout ratio is just 30% and the yield is 7.42%. With Germany having the largest economy in Europe and the possibility that dividends can be raised in the future it may be a better bet. The recent takeover of Dresdner Bank by Commerzbank (OTC: CRZBY) will have an impact on the German banking industry.

2.Llyods tops this list with a high yield and a great payout ratio. However the dividend growth rate has been stagnant in the past 5 years. Note: The Dividend yields for British bank ADRs like Llyods are actually higher than the rates mentioned in the table above since they are computer generated and British banks pay a variable dividend each year. Thanks to a reader who pointed out this to me in an earlier article.

3. ING is growing in many emerging market countries and has a stable, high dividend yield. Other than banking ING operates in the insurance and asset management businesses as well.

4. Spanish banks like BBV and STD offer exposure to the fast growing Latin American emerging markets. Last year BBV purchased Compass Bancshares in the US for $9.6B. Some believe that it was not a wise move for BBV at that time and as we know now the timing was wrong as well.

5. Due to the downturn in Irish economy the Irish banks IRE and AIB have very high dividend yields. As the economy improves they should do well.

6. HSBC Bank has a nice yield and a good payout ratio of 52%. Though HBC has high US exposure compared to other British banks it has held up well in this market. This is due to many efficient and forward-thinking initiatives implemented by the bank.

Disclosure: Long BBV,LYG, ING, RBS, STD

Note: All data is thought to be accurate at the time this article was written.Please do your own research before making nay investment decisions.

In the above dividend analysis, I have not addressed the tax implications for US investors and the points presented are based on my opinions. Readers feel free to add your comments and suggestions.