Transnational Companies (TNCs) with large exposure to emerging markets offer a simple and easy way for investors to benefit from the growth in those markets. These companies are usually large cap, well established companies and unlike their emerging market peers most investors are already familiar with them. Some of the issues with emerging market firms such as lack of transparency in accounting, liquidity in equity trading, access to information, etc. can also be avoided by investing via TNCs.
From the UNCTAD World Investment Report 2011 report:
Corporate profits, which were slashed by the crisis, have rebounded sharply for many of the largest TNCs in the world (section A). The swift economic recovery of the largest developing economies played an important role in restoring these firms to income growth. In some cases, income from developing and transition economies has grown to account for a significant share of TNCs’ operating income. This trend spans industries, with TNCs as varied as Coca-Cola (United States), Holcim (Switzerland), and Toyota Motors (Japan) deriving more than one-third of their operating income from developing economies (figure I.23).
15 TNCs with a high percentage of their operating income in 2010 from developing and transition economies is show below:
Click to enlarge
Source: UNCTAD World Investment Report 2011, UNCTAD
The 15 firms are shown below with their tickers on the US markets and current dividend yields:
1.Company: Anglo American PLC (AAUKY)
Current Dividend Yield: 2.29%
Sector: Metal Mining
Country: UK
2.Company: Anheuser Busch Inbev SA (BUD)
Current Dividend Yield: 2.22%
Sector:Beverages (Alcoholic)
Country: Belgium
3.Company:GlaxoSmithKline PLC (GSK)
Current Dividend Yield: 4.96%
Sector:Major Drugs
Country: UK
4.Company: The Coca-Cola Co (KO)
Current Dividend Yield: 2.72%
Sector:Beverages (Nonalcoholic)
Country: USA
5.Company: Toyota Motor Corp (TM)
Current Dividend Yield: 1.65%
Sector:Auto & Truck Manufacturers
Country: Japan
6.Company: Unilever NV (UN)
Current Dividend Yield: 3.86%
Sector:Food Processing
Country: The Netherlands
6.Company: Unilever PLC (UL)
Current Dividend Yield: 3.80%
Sector:Food Processing
Country: UK
7.Company: SABMiller PLC (SBMRY)
Current Dividend Yield: 3.44%
Sector:Beverages (Alcoholic)
Country: UK
8.Company: Nestle SA (NSRGY)
Current Dividend Yield: 3.62%
Sector:Beverages (Alcoholic)
Country: Switzerland
9.Company: Barrick Gold Corp (ABX)
Current Dividend Yield:2.11%
Sector: Gold & Silver Mining
Country: Canada
10.Company: Holcim Ltd (HCMLY)
Current Dividend Yield: 2.09%
Sector:Construction – Raw Materials
Country: Switzerland
11.Company: British American Tobacco PLC (BTI)
Current Dividend Yield: 4.05%
Sector:Tobacco
Country: UK
12.Company: Nissan Motor Co Ltd (NSANY)
Current Dividend Yield: N/A
Sector:Auto & Truck Manufacturers
Country: Japan
13.Company: BASF SE (BASFY)
Current Dividend Yield: 4.83%
Sector:Chemical Manufacturing
Country: Germany
14.Company: Honda Motor Co Ltd (HMC)
Current Dividend Yield: N/A
Sector:Auto & Truck Manufacturers
Country: Japan
!5.Company: Bayer AG (BAYRY)
Current Dividend Yield: 3.22%
Sector: Major Drugs
Country: Germany
Note: Dividend yields noted are as of June 22, 2012
From an investment standpoint, despite the current European crisis the firms from the UK and Europe listed above are excellent picks. Due to the nature of the industry, investors can avoid auto makers and accumulate consumer goods makers such as Unilever (UN, UL) and Nestle (NSRGY) in a phased manner at different entry levels.
Disclosure: No Positions
