Ten Reasons to Invest in Australia

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Australia is a developed country with a population of about 22 million. The country is rich in many natural resources and is ranked highly in many global comparisons of factors such as quality of life, healthcare, education, etc. Australia is similar to Canada in that both the countries have parliamentary democracy and are commodity-based economies.  Australia, known as the “The Lucky Country”, offers many advantages as an investment destination.

sydney.jpg

The following are some of the reasons to invest in Australia:

  1. Australia is one of the few OECD countries to successfully weather the global financial crisis and it was the first G20 country to tighten the monetary policy by raising the key interest rate last October.
  2. The country enjoyed consecutive economic growth for 17 years from 1992 to 2008 and is best positioned to participate in the growth of Asian markets of India and China due to its close proximity and natural resources.
  3. The fiscal position is relatively strong and the current account averages just 4.5% of the GDP.
  4. Many of Australia’s major export markets are in the vibrant and growing Asia including the countries of China, Japan, India, South Korea making it less dependent on the US and European countries.
  5. Australian companies generally have higher dividend yields than most US companies.
  6. Some of the Australia’s large exports are coal, iron ore, wheat, alumina, etc. Australia is the largest exporter coal in the world and China is the largest consumer of Australian coal. On the services sector, education has become a major export with Australian universities attracting thousands of students from the emerging markets of Asia.
  7. The unemployment rate as of January,2010 is just 5.4% which is much lesser than the OECD average.
  8. Australia’s equity market has been the best performing market for the past 110 years since 1900 with a real return of 7.5% per year.
  9. Australia has the political risk is the lowest in the region.
  10. The regulatory environment is strong but business friendly. A recent IMF study confirmed that Australian banks remained sound during the global credit crisis.

How to Invest in Australia?

The simplest and easiest way to invest in Australia is via the iShares MSCI Australia Index ETF (EWA). The fund has an asset base of about $2.2B and contains most of the the large companies there. Another way is to go with the closed-end for Aberdeen Australia Equity Fund (IAF). The expense ratio is 1.73% and the fund has total assets of about $208M. A third alternative is to invest directly in Australian equities. Some of the ADRs available are National Australia Bank (OTC: NABZY), Westpac Banking (WBK), Australia and New Zealand Banking Ltd (OTC: ANZBY), BHP Billiton (BHP), etc. The complete list of Australian ADRs can be found here and here.

Another Take on Top 10 German Dividend Stocks

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We reviewed the ten German stocks with high dividend yields last December. In this post lets take another look at the top German stocks that pay high dividends. One of the ETFs that is focused on German equities with high dividends is the ETFlab DAXplus® Maximum Dividend ETF.  This ETF tracks the DAXplus® Maximum Dividend Index and contains 20 stocks that with the highest dividend yield forecast.

The Top 10 Constituents in the ETFLab DAXplus® Maximum Dividend ETF are:

1. Deutsche Telecom (DTEGY)
Current Dividend Yield of Xetra Listed Equity(EUR): 9.78%
Current Dividend Yield of ADR: 8.04%

2. RWE AG (OTC: RWEOY)
Current Dividend Yield of Xetra Listed Equity(EUR): 7.10%
Current Dividend Yield of ADR: 6.89%

3. Hannover Rueckversicherungs (OTC: HVRRY)
Current Dividend Yield of Xetra Listed Equity(EUR): 7.08%
Current Dividend Yield of ADR: N/A

4. Wincor Nixdorf AG (WNXDY)
Current Dividend Yield of Xetra Listed Equity(EUR): 7.07%
Current Dividend Yield of ADR: 3.85%

5. E.ON AG (OTC: EONGY)
Current Dividend Yield of Xetra Listed Equity(EUR): 6.84%
Current Dividend Yield of ADR: 5.63%

6. Muenchener Rueckvers AG (OTC: MURGY)
Current Dividend Yield of Xetra Listed Equity(EUR): 6.54%
Current Dividend Yield of ADR: 4.69%

7. Duestche Post AG
Current Dividend Yield of Xetra Listed Equity(EUR): 5.94%
Current Dividend Yield of ADR: N/A

8. Allianz SE
Current Dividend Yield of Xetra Listed Equity(EUR): 5.76%
Current Dividend Yield of ADR: N/A

9. Symrise AG (OTC: SYIEY)
Current Dividend Yield of Xetra Listed Equity(EUR): 5.24%
Current Dividend Yield of ADR: 3.19%

10. Bilfinger Berger AG (OTC: BFLBY)
Current Dividend Yield of Xetra Listed Equity(EUR): 4.61%
Current Dividend Yield of ADR: N/A

RWE AG and EON AG are two of the largest electric and gas utilities in Germany with operations in  other European countries as well. EON’s U.S. Midwest unit focuses primarily on the electricity and gas utility sectors in the state of Kentucky.Deutsche Telecom (DT) operates the T-Mobile cell phone service in the U.S.

11 Foreign Stocks with More than 5% Dividend Yields

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Many foreign stocks trading as ADRs in the US markets have above average dividend yields. The following 11 stocks pay dividends of over 5% as of the February 26, 2010:

1. YPF SA(YPF)
Current Dividend Yield: 7.85%
Country: Argentina
Sector: Integrated Oil & Gas

2. TOTAL (TOT)
Current Dividend Yield: 6.09%
Country: France
Sector: Integrated Oil & Gas

3. Philippine Long Distance Telephone Co(PHI)
Current Dividend Yield: 5.75%
Country: Philippines
Sector: Telecom

4. ENI Spa(E)
Current Dividend Yield: 6.09%
Country: Italy
Sector: Integrated Oil & Gas

5. E.ON AG (OTC: EONGY)
Current Dividend Yield: 5.63%
Country: Germany
Sector: Electric Utility

6. Fortum(OTC: FOJCY)
Current Dividend Yield: 5.16%
Country: Finland
Sector: Electric Utility

7. Ecopetrol (EC)
Current Dividend Yield: 5.57%
Country: Colombia
Sector: Integrated Oil & Gas

8. Portugal Telecom (PT)
Current Dividend Yield: 7.10%
Country: Portugal
Sector:  Telecom

9. National Australia Bank Ltd(OTC: NABZY)
Current Dividend Yield: 5.60%
Country: Australia
Sector: Banking

10. Banco De Chile (BCH)
Current Dividend Yield: 6.29%
Country: Chile
Sector: Banking

11. Veolia Environnement(VE)
Current Dividend Yield: 5.16%
Country: France
Sector: Environmental Management Services

National Australia Bank trades on the OTC markets. The stock has more than doubled from its 52-week lows. Finland-based electric utility Fortum is a consistent high dividend paying company. Fortum’s average dividend payout ratio of 50% to 60%. Last year, sales totalled EUR 5.4 billion and the operating profit was EUR 1.8 billion.  E.ON AG of Germany is another top electric utility that offers stable and consistent growth.

Note: The data shown here are known to be accurate from the sources used. Please make your own due diligence before making any investment decisions.

Forget Emerging Markets and Choose Frontier Markets in 2010?

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While many of the investors are focused on the emerging markets, some brave and sophisticated investors are looking beyond the horizon and venturing into the frontier markets. Some examples of  the frontier markets are Saudi Arabia, Kuwait, Morocco, Algeria, Lebanon, Colombia, Vietnam, etc.

The prevailing low interest rates in many countries around the world and the rising demand for commodities are two of the reasons that are advantageous to frontier markets.  For example, rising crude oil and natural gas prices are benefiting Kazakhstan. Saudi Arabia, Qatar, Nigeria, Oman and Kuwait are profiting from higher crude oil prices.

The performance of a select few frontier markets and India, China are shown in the following chart:

frontier-markets

A recent research report noted:

“Mark Mobius, executive chairman of Templeton Asset Management believes frontier markets represent some of the best contrarian investments at the moment.

Mobius, who manages a number of emerging markets portfolios at Franklin Templeton, considers countries such as Vietnam, Pakistan, Bangladesh and Romania as ones to watch this year. He says he currently favors commodity and consumer orientated stocks. Qatar, Kazakhstan and Nigeria are being watched because of their natural resources.”

A huge bubble is forming in the emerging markets of India and China especially in the real estate sector. This does not portend well for the future. The real estate bubble in the US lead to the credit crisis bringing the global economy to its knees. Hence it may be the time to explore some of the frontier markets. However frontier markets are not for the faint-hearted. So extreme caution is needed before jumping into any of these markets. Equities in frontier markets may be highly illiquid and information may not readily available to evaluate companies.

Some of the Frontier Market ETFs include:

Claymore/BNY Mellon Frontier Markets ETF (FRN)
Market Vectors Gulf States ETF (MES)
Market Vectors Africa ETF (AFK)
Market Vectors Vietnam ETF (VNM)
WisdomTree Middle East Dividend Fund (GULF)
SPDR S&P Emerging Middle East & Africa ETF (GAF)

U.S. Healthcare System – Is it Any Better ?

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We have discussed about the U.S. healthcare system before a few times. On Thursday, the President hosted a day-long televised healthcare summit. It ended without a deal after many hours of bickering by both the parties. Its been more than a year since the President took office and yet the healthcare debate still rages on this country with no end in sight. Thousands of  hours have already been wasted by all those involved including lobbyists, politicians, company executives, media pundits, etc. discussing the pros and cons of the health care reform proposals.

From a BBC news report today:

“The president and his allies want to expand health coverage to include millions of uninsured Americans.

Republicans said his plans were not acceptable and called for a fresh start.

In his radio address, he said he remained “eager and willing to move forward with members of both parties”.

“It’s time for us to come together. It’s time for us to act.

“It’s time for those of us in Washington to live up to our responsibilities to the American people and future generations. So, let’s get this done.”

None of the proposals put forward by the administration or the Republicans addresses some  the key issues that should be the main points of any discussion of the U.S. healthcare system. Two of them are the soaring costs and the inefficiencies in the current system.

The chart below shows the comparison of some of the healthcare factors between the U.S. and a few other countries:

us-healthcare-comparison.JPG

Source: WHO data via The Guardian

The  U.S. spends the highest on a per capita basis on healthcare and has only 26 doctors per 10,000. Germany spends a bit above half the US spending and still has more doctors, hospital beds and a higher life expectancy. There is a precipitous drop in per capita spending from the U.S. figure to the next highest spending country Canada. Japan also spends much lesser than the U.S. and yet the Japanese have a higher life expectancy, more midwives and hospital beds. Clearly the U.S. healthcare system needs a much complete and thorough analysis and redesign than the ones currently under discussion.