Foreign Utilities List with Current Dividend Yields

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In 2008, while the S&P; 500 was down 38.49%, utilities dropped 31.55%. Usually utilities hold up well in a bear market as they are considered defensive plays. However in current times utilities are also getting killed since they have high capital expenditures, engage in energy trading activities, etc. So in a way they are defensive as they were in the past. However unlike banks and other sectors utilities are a necessity that people have to depend on for everyday life. We could say that next to consumer staples like food, utilities are the next important item that consumers pay their bills. Hence utility stocks are an integral part of a well-diversified portfolio.

The following table lists all the foreign utilities traded in the US organized exchanges together with the current dividend yield and prices:

Note: All data is as of market close Jan 5,2009.

An investor looking to get some exposure to foreign utility stocks can use the above table as a starting point to do further research. Emerging market companies like CIG, CPL, MGS, etc. may pay high dividends but they are not consistent and the stocks themselves maybe volatile as well. Only a developed markets utility stocks trade in the US. In a future post we shall explore those stocks that are traded in the OTC exchanges.

A Look at Canadian Utility TransAlta Corp.

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Calgary-based TransAlta Corp. is an electric utility with operations in the western part of Canada. The company generates power using coal, hydro, gas, geothermal and wind. About 70% of power generated is sold under government mandated long-term contracts. From their corporate site “TransAlta has been in the power business for almost 100 years – our output from more than 50 power plants is more than 8000 Megawatts – enough to power almost 7 Million homes”

TransAlta(TAC) is the only Canadian utility that is part of the S&P; ADR Index.

The current dividend yield is an excellent 5.22% and the company has modest growth over the years since it is a utility. Average annual earnings growth over the last 5 years is 7.50% and the profit margin is about 10%. In 52 weeks, TAC is down 39% – which is high compared to other utilities. The P/E of 18.99 is much higher than the industry average of 13.73.

TAC received an acquistion bid from LS Power Equity Partners, an entity associated with Luminus Management LLC, and Global Infrastructure Partners which valued the company at C$39 per share in cash. On August 6th, TAC’s board rejected the proposal saying that the offer undervalued the company. Currently the stock trades at C$25.25 in the TSX – much lower than the offer received back in July.

Compared to some US and European utilities, TransAlta is an average performer over the long-term. However if an investor is looking to invest in a Canadian utility this is one option.

Banks that are Winners in Other Countries

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On Dec 6th, I wrote a post titled The Best Banks of the World 2008 in my TFS site which discussed the top banks in the world. The Banker Magazine presented awards to the best banks in each individual country. In this post let me mention a few banks that won the awards in countries they operate in other than their own home country. Many of the multi-national banks today have huge presence in other countries and in some places they are better than the local domestic banks. The Banker magazine selected these banks based on many factors like growth,technology, strategy and a questionnaire that banks were asked to submit.1. Argentina – The Best Bank in Argentina is Banco Santander Rio. This bank is a subsidiary of one of the largest banks in Spain – Banco Santander (STD). Banco Santander Rio used to be called “Banco Río”.STD has huge presence in other Latin American countries like Brazil, Mexico, Chile, etc. as well but they were beaten by other banks in those countries.

2. Belize – The Best Bank in Belize is ScotiaBank Belize. This bank is a unit of The Bank of Novo Scotia (BNS) of Canada. BNS is the only Canadian bank to that has a significant interest in Latin American banking. In addition to winning the award, ScotiaBank won the top bank award in the following countries as well:

  • Costa Rica – ScotiaBank
  • Guyana – ScotiaBank
  • Turks & Caicos – ScotiaBank
  • Canada – ScotiaBank

So Scotia Bank of Canada won the award in 4 countries other than Canada.

3. South Africa – The Best Bank is Standard Bank Group. Recently Business Week had an article which talked about how South African companies excel in growing in other African countries. Specifically they mentioned the Standard Bank. It won the award for the best bank in the following countries also:

  • Malawi
  • Namibia
  • Swaziland
  • Botswana
  • Democratic Republic of Congo
  • Tanzania
  • Zimbabwe

4. Colombia – The Best Bank is BBV Colombia. This bank is a subsidiary of Banco Bilbao Vizcaya Argentaria(BBV) of Spain. BBVA also won the award for Paraguay and Venezuela as well. However in its home country Spain, the best bank award went to Banco Santander.

Top Seven Global HealthCare Stocks

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Investors are attracted to HealthCare stocks during recessions as these healthcare companies perform better when compared to other companies in other industries. For example in 2008, the S&P 500 Index was down 38.49% but the healthcare components in the index were off only 24.48%. Consumer staples was the best performing group with a negative return of 17.66%.

Among the stocks in this sector, it is advantageous to invest in large firms that have a diversified portfolio of products and a presence in many countries. In order to identify such companies I selected the Dow Jones Global Titans 50 Index. This index components are selected based on free-float market capitalization, sales/revenue and net profit. It is composed of the most established blue-chip companies from around the world. Out of the seven healthcare components in this index, four are US-based. The following is a brief overview of these seven companies:

1.Abbott Laboratories (ABT) is a global health company with 68,000 employees and has been in business for over 120 years.In 2007, total sales was $25.9 B. Abbott operates in three divisions: Pharmaceuticals,Medical Products and Nutritional Products. Some of Abbott’s brands include Ensure, Pedialyte, Similac, etc. ABT pays a dividend of 2.7% and the P/E is 18.33. Last year, “the United States Food and Drug Administration (FDA) approved the Company’s SIMCOR (Niaspan/simvastatin), a medicine for cholesterol management.”

2.The UK-based GlaxoSmithKline PLC (GSK) sells its products in over 140 countries. In the Pharmaceutical segment, GSK’s brands include Avandia, Paxil, Zantac, etc. and in Consumer Healthcare some of its brands are Aquafresh, Eno, Nicorette. In 2007, total revenues exceeded $30B. The current yield is 5.10%.

3. Johnson& Johnson (JNJ) markets a wide range of products such a Acuvue, Neuragena, Listerine, Band-Aid, Tylenol, etc. Total Revenue in 2007 was $64.5B. Annual EPS growth is about 11%. JNJ is a solid long-term classic growth stock with an incredible ability to weather any kind of market.

4. New-Jersey based Merck & Co Inc(MRK) has manufacturing operations in 25 countries. Total sales in 2007 was $24.2 B. Some of Merck’s popular products are Singulair, Vytorin, etc. MRK’s current yield is 5.0%. In the past 12 months, while peer companies have increased earnings Merck saw earnings decline.

5. Pfizer Inc(PFE) is “the world’s largest research-based biomedical and pharmaceutical company” with headquarters in New York. Revenues in 2007 was $48.4 B. Some of Pfizer’s key products include Aricept, Detrol, Viagra,Lipitor, etc. The annual EPS growth in the last 5 years has been negative but currently the yield is 7.23%.

6.Switzerland-based Novartis AG (NVS) operates in three divisions: Pharmaceuticals, Vaccines and Diagnostics and Consumer Health. Novartis had $42.B in revenues in 2007.Earnings have growth at 12.5% annually and the stock pays a dividend of 3.09%. Novartis portfolio of products include Lamisil, Gleevac, Exedrin, Gas-X, Maalox, etc.

7. Roche Holding Ltd is traded in the OTC market with ticker RHHBY. Roche also based in Switzerland.In 2007, sales totalled $41.3 B. On Dec 19th, Roche announced the following changes to its ADR program:

  • Changed Depository Bank to JP Morgan from Bank of New York Mellon.
  • Upgraded to the OTCQX trading platform.
  • Changed Ratio to 1 ADR = 1/4 Non-voting share. Earlier 1 ADR represented 1/2 of non-voting share.

Unluck of the Irish Banks

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A few years ago The Republic of Ireland had one of the fastest growing economies in Europe. Then growth slowed and in the past two years or so the Irish economy stagnated and growth came to a standstill.

Irish stocks have been hit pretty hard as well in 2008 – especially the banks. As of market close today, the Bank of Ireland (IRE) is down an incredible 92.11%, Allied Irish Banks (AIB) is down 89.79% and Anglo Irish Bank (AGIBY) is trading at a $0.20 (yes thats right its just 20 cents) a share from much higher levels in the beginning of the year.

On Dec 22, the Government of Ireland announced capital infusions into the three banks amounting to 5.5 Billon Euros. As per the plan, the government will invest:

2.0 Bil. Euros each in IRE and AIB

and

take a 75% stake in Anglo Irish Bank – effectively nationalizing it.

The above data clearly shows that the supposedly safe Ireland banks were not immune to the global slowdown. A while ago Irish banks and banks from other European countries boasted that they had no or little exposure to the sub-prime crisis in the USA. That did prevent them from falling since their domestic markets cratered. Residential, Commercial Property loans went bad just like in the US.

The closed-end fund “The New Ireland Fund” (IRL) is also down over 75% this year.

So investors interesting in gaining some exposure may want to wait for a while before investing in Irish stocks. In addition to the world economy getting back on its feet, one has to monitor the domestic economy especially he housing sector.