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Special dividends find new fans
Cash in on the resilience of tourism
American Falls, New York State, USA
The official U.S. unemployment rate stood at 9.6% last month. The number of unemployed persons according to to government data totaled 14.9 million. 42% of those unemployed in August were long-term unemployed (27 weeks or more). Many of the other economic figures published nowadays are also negative. While some talk of a double-dip recession, others are even more pessimistic. For example David Rosenberg, chief economist of Gluskin Sheff recently outlined 13 reasons to suggest that this so-called recovery is actually a depression.
In an related note Matthew D. McCormick, Portfolio Manager at Bahl & Gaynor Investment Counsel said:
“Many people believe the U.S. economy is out of the recession or close to it. At Bahl & Gaynor, we think this recession is like no other since the Great Depression and the subsequent recovery will be longer – and weaker – than most expect. Thus, an extended period of tepid economic and earnings growth is a distinct possibility. Such a recovery could be similar to the 1974 to 1982 economic “malaise.—
If a protracted economic stagnation similar to 1974 to 1982 repeats, then investors may want invest in dividend paying stocks. The S&P’s price return during this period was an annualized 4.14%. However the total return (including dividends) for this period was an annualized 9.39%. Hence dividends accounted for 55.09% of the S&P 500’s total return.
Source: Bahl & Gaynor Investment Counsel
Ned Davis Research analyzed the S&P data for the same period and found that dividend paying stocks also outperformed non-dividend payers by an annualized 3.89%.
Hence instead of worrying about whether we may have a double-dip recession or not, investors looking to select some stocks for their portfolio may want to consider adding dividend paying stocks.
The SPDR S&P 500 ETF (SPY) has a 1.90% dividend yield and the iShares Dow Jones Select Dividend ETF (DVY) has a 12-Month Yield of 3.77%.
Some foreign stocks have much higher yields at current levels. A few of the high yielding foreign stocks include French utility giant Veolia Environnement (VE) paying 5.75%, Italian oil major Eni Spa(E) yielding 6.14%, Brazilian electric utility CEMIG (CIG) with an yield of 5.17%, National Australia Bank Ltd (OTC: NABZY) paying 5.67% and Philippine Long Distance Telephone Co (PHI) with a dividend yield of 6.22%.
The ‘Most Trusted Brands’ in India for 2010 based on The Economic Times-Brand Equity’s survey of 300 brands in the consumer products and services category are listed below:
[TABLE=539]
Finnish mobile phone maker Nokia(NOK) tops the ranking. Nokia has held the top spot for three years in a row confirming the strength of its brand power in one of the largest growing cell phone market in the world.
US-based Colgate-Palmolive’s (CL) brand Colgate was ranked number two. Colgate has had a presence in India since the 1930s.
Hindustan Unilever’s Lux soap brand took the third rank followed by Reckitt Benckiser’s Dettol disinfectant. Hindustan Unilever is the Indian subsidiary of Anglo-Dutch consumer products giant Unilever (UN, UL). In addition to the Lux brand, other Hindustan Unilver’s brands also took the rankings from six thru ten. Reckitt Benckiser is a UK-based firm whose stock trades on the London Exchange. The fifth most trusted brand is Britannia owned by the domestic food company Britannia.
Related: The Best 50 Chinese Brands 2010Â
According to a recent article in Bloomberg BusinessWeek, 108 foreign large cap reputable companies now trade on the OTC market – also known as the Pink Sheets. Some of the recent firms that have moved to this market include France’s banking giant BNP Paribas, Germany’s Deutsche Telekom and UK’s pay-TV operator British Sky Broadcasting Group. Some of the reasons for the exodus of foreign companies from the traditional exchanges are:
Many of the large-cap foreign firms that are listed on this market still follow the strict reporting requirements of their home countries. So US investors are able to find adequate information on these companies.
The OTCQX designation is awarded to companies that have annual revenue of $2 million and a market value of $5 million.Out of the 9,622 stocks listed on the Pink Sheets just 129 meet this criteria.
Five OTCQX stocks with their current dividend yields are listed below:
1.Company: Akzo Nobel N.V. (AKZOY)
Sector: Chemicals
Country: The Netherlands
Current Yield: 4.69%
2.Company: BASF SE (BASFY)
Sector: Chemicals
Country: Germany
Current Yield: 4.00%
3.Company: Marks & Spencer Group Plc (MAKSY)
Sector: Retail
Country: UK
Current Yield: 5.28%
4.Company: Deutsche Telekom AG (DTEGY)
Sector: Telecom
Country: Germany
Current Yield: 7.82%
5.Company: AXA SA (AXAHY)
Sector: Life Insurance
Country: France
Current Yield: 4.17%
For more foreign stocks visit the OTC market site.
One of the sectors that is often overlooked by investors is the hospitality sector. Travel and leisure is a multi-billion industry that is made up of lodging companies, tour operators, airlines, casinos, cruise ship operators, etc. The tourism sector is booming in emerging markets. Even in the recession-hit developed world, countries such as France, US and Spain continue to attract millions of foreign visitors each year who stay at hotels, resorts and other facilities. Many of the foreign companies in the lodging industry are listed in the OTC markets. In this post lets take a quick look at a few of them.
1. Genting Malaysia Berhad (OTC: GMALY) is part of the Genting Group which is a leading Malaysian multinational corporation. Genting Malaysia “is involved in the leisure and hospitality business and its activities cover theme parks, gaming, hotels, seaside resorts and entertainment. The jewel of its crown is Resorts World Genting, a premier integrated family leisure and entertainment resort at the peak of Genting Highlands that attracted 19.5 million visitors in 2009.
The company also owns and operates two beautiful seaside properties called Awana Kijal Golf, Beach & Spa Resort in Terengganu (on the east coast of Peninsular Malaysia) and Awana Porto Malai in Langkawi (off the west coast of Peninsular Malaysia).”
Resorts World Genting outside of Kuala Lumpur is a major tourist attraction for Chinese and other Asian visitors. The ADR currently has a 3.35% yield and is up about 5% YTD.
2. UK-based Intercontiental Hotels (IHG) is a holding company that owns the InterContinental Hotels & Resorts, Crowne Plaza Hotels & Resorts, Holiday Inn Hotels & Resorts , Holiday Inn Express, Staybridge Suites, Candlewood Suites and Hotel Indigo brands with 4,438 properties worldwide. The company has a $4.9B market cap and the dividend yield is 1.52%.The share price has grown by 19% so far this year.
3. Shangri-La Asia(OTC: SHALY) is a Hong Kong-based company that owns and operates hotels under the ‘Shangri-La’, ‘Traders’, ‘Rasa’, ‘Summer Palace’ and ‘Shang Palace’Â brand names. The Shagri-La brand is a top-quality brand in many Asian markets. The ADR stock appears to be traded very rarely.
4. Club Mediterranee (OTC: CLMDY) runs the upmarket all-inclusive resort villages under the “Club Med” brand in France and other countries. Originally the company focused on couples who wanted to have a good time in their resorts at exotic locations. However according to a recent story in the Journal, the company is moving away from that strategy and plans to focus on all types of guets. In June, Club Med shares rose strongly after Chinese conglomerate Fosun International bought a 7.1% stake in the firm.
5.UK-based Whitbread(OTC: WTBCY) was originally started as a brewery in the 1800s. However the company sold off its liquor business a few decades ago and entered the lodging sector.Today Whitbread operates the Premier Inn hotel chain, restaurants and the Costa Coffee stores mainly in the UK. The highly popular Premier Inn hotel brand operates mostly in the low price range hotels category. There are 588 Premier Inn locations in the country.In addition the company also operates one hotel in Dubai, Ireland and is planning to open a hotel in the city of Bangalore, India.Costa Coffee stores can be found not only inside malls and other places but also in highway service stations. Both Costa Coffee and Premier Inn have lots of potential for growth. The stock does not pay a dividend.