The following table lists eight Consumer Staples ADR stocks. These picks are components of the S&P ADR Index which “is made up of those companies from the S&P 700 that offer either Level II or Level III American Depository Receipts (ADRs), global shares, or ordinary shares in the case of Canadian equities.”
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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.
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.
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 RÃo”.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:
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:
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.
