Eight Latin American Utility Stocks Traded in New York

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Itaipu Dam

Photo: Itaipu Dam, Brazil

In this article lets review the 8 Latin American utility stocks that trade in the New York Stock Exchange. Brazil dominates this list with 4 stocks and Chile and Argentina have 2 stocks each.

People invest in utility stocks for their dividend yields. Unlike other sectors, utility stocks tend to provide some stability to a well diversified portfolio. Some would argue that this assumption may not be true these days due to many risky strategies followed by utilities. There are many risks to investing in emerging market utilities such as political risk, currency risk, interest rate risk, etc.So caution is warranted before picking up some of the stocks mentioned in this piece. For example, countries like Argentina have had their share of economic upheavals.

The table below lists the nine Latin American utilities with the Dividend Yields and Dividend Growth Rate(if available):

[TABLE=85]

Brief Summary of each stock:

1. Edenor (EDN) – Edenor is the largest electricity distributor in Argentina with a customer base of 7 million mostly in the northwestern and northern Buenos Aires metropolitan area. Edenor’s customers are largely urban residential customers who have low delinquency rates in terms of bill payment.

Since its listing in April 2007, EDN stock has not performed well.The stock is down over 55% in the past 52 weeks. EDN has a market cap of about $441 M and it has not paid a dividend yet. On dividends, the2nd quarter earnings report says “Since the restructuring of the Company’s financial debt referred to in Note 14, the Company is not
allowed to distribute dividends until April 24, 2008 or until such time when the Company’s leverage ratio is lower than 2.5, whichever occurs first.”

2. Metrogas (MGS) – This utility distributes natural gas to about 2.1 million customers in the Buenos Aires area. MGS has a market cap. of about $205M and the stock closed at $3.60 last Friday.The PE is about 37.06 and the company pays no regular dividend.

3.Companhia Paranaense de Energia (ELP) – ELP is an electricity producer and distributor in Brazil.

ELP has a dividend yield of just 1.04% and the PE is 6.69.In the past 5 years, the revenues have grown at an annual rate of about 15% and the annual dividend growth rate has been 24.57%.

4.Companhia Energetica de Minas Gerais -CEMIG (CIG) – CIG is another electric utility in Brazil but has interests in natural gas and telecom as well. It serves 17 million customers in the State of Minas Gerais. 51% of the company is owned by the State of Minas Gerais.

CIG has a dividend yield of 2.85% and a market cap. of $9.6B.A $1000 investment 5 years ago in the CIG ADR would have grown to $3,176.25 as of 9/5/08 including dividend reinvested.Thats a return of 221.37%. (Source: “Investment Simulator”
in the CIG corporate site. Date Range used: 9/5/2004 to 9/5/2008)

5.CPFL Energia (CPL) – CPL is a Brazilian electric utility.From the corporate site: “Operation in the States of Sao Paulo, Rio Grande do Sul, Parana and Minas Gerais, three major economic and industrial centers in Brazil.”

CPL’s dividend yield is 8.41%. CPFL Energia is a member of the Bovespa Index. The company has a policy of distributing a minimum of 50% of the net earnings (payout ratio) on a half-yearly basis.

6.SABESP (SBS): This company provides water and sewage services in the State of Sao Paulo, including the City of Sao Paulo. SBS has a dividend yield of 5.11% but is not paid on a regular basis. Total Revenue has increasing consistently in the past 5 years at a rate of about 9.65%.

7.Endesa-Empresa Nacional de Electricidad (EOC) : Endesa Chile is the largest electricity producer in Chile with operations in Bazil, Colombia, Peru and Argentina as well.

The dividend yield for EOC is 1.74%. Total revenue has grown at a rate of 12.20% in the past 5 years and the dividend growth at 27.20% annually. With 47 hydroelectric plants and operations in 5 countries EOC is a safer bet.

8.Enersis (ENI): Enersis S.A. (Enersis) is another electric utility in Chile. EOC discussed above is one of its subsidiaries. ENI has a dividend yield of 2.61% and a market cap of $10.5B.

Performance of Latin American utility Stocks Year-To-Date (YTD):

Latin

Conclusion:
The Latin American utility stocks may not be suitable for all class of investors due to the risks mentioned above and their dividend payment are not stable and consistent. For risk takers there a few more picks trading in the OTC market. But for an investor looking to gain some exposure to the Latin American emerging market utility sector the above table can a good starting point to dig into these companies.

Seven Canadian Energy Stocks

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Canada is blessed with many natural resources. Canada exports most of these resources to other countries including the US which is its largest trading partner. Some of the natural resources are timber, minerals like gold, uranium, crude oil(from tar sand), etc.Since Canada is heavily dependent on commodities we can say that the Canadian economy is a commodity-based economy. Unlike commodity driven economies like those of Russia, Brazil, etc. Canada has a stable political system, western style democracy, closer to the US, etc.

Recently as the price of crude oil rose recently Canadian tar sands became even more valuable. In addition to Calgary, Alberta the demand for Canadian crude has create a few boom towns like Fort McMurray in Northern Alberta. Sure that the price of oil is falling for the past few days. But I believe that this is only temporary. In the next few months it may start to back up again. An investor looking to add some stocks from the energy sector can look into the Canadian energy sector stocks listed below. All these stocks trade as interlisted stocks in New York.

1. Company Name: Encana
Ticker: ECA
P/E : 16.52
Dividend Yield : 2.25%

2. Company Name: Suncor Energy Inc
Ticker: SU
P/E : 16.46
Dividend Yield : 0.36%

3. Company Name: Canadian Natural Resources Ltd
Ticker: CNQ
P/E : 25.90
Dividend Yield : 0.44%

4. Company Name: Imperial Oil Ltd
Ticker: IMO
P/E : 13.04
Dividend Yield : 0.79%

5. Company Name: Petro-Canada
Ticker: PCZ
P/E : 5.57
Dividend Yield : 1.82%

dollar

6. Company Name: Talisman Energy Inc
Ticker: TLM
P/E : 14.03
Dividend Yield : 1.14%

7. Company Name: Nexen Inc
Ticker: NXY
P/E : 11.25
Dividend Yield : 0.65%

In addition, there are other energy stocks like Husky Energy Inc but they trade on the OTC exchange. For those of you who have access to the Toronto Stock Exchange, a better pick to gain exposure to the Canadian energy sector would be the ishares Canadian Energy Sector Index ETF with ticker XEG.TO.

ANZBY – Stock Split

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Australia & New Zealand Banking Group Ltd (ANZBY) split its ADR stock in the ratio of 5:1 effective July 24, 2008.

Currently ANZBY trades on the OTC market for about $14.05 a share. At these levels it has an attractive dividend yield of 8.35%. The PE ratio is 8.14 and there are nearly 2 billion shares outstanding. The stock used to trade on the NYSE for many years. After moving to the OTC markets, it has become difficult to get updated correct information on the stock.But this does not mean the stock is bad. Just that OTC stocks can be challenging to research.

ANZBY competes with other major Aussie banks like Westpac (WBK) and National Australia Bank (NABZY).

 

A Look at DJ EURO STOXX 50 ETF: FEZ

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The DJ Euro Stoxx ETF FEZ from State Street Global Advisors seeks to mimic the Dow Jones Euro Stoxx Index. This Index contains 50 Eurozone companies that are market leaders in their sector. Eurozone area includes the most of the countries in Western Europe except UK. This ETF provides exposure to some of the largest companies of Europe.

Some observations of this ETF:

1. Germany and France account for about 64% of the portfolio.
2.Only about 32.00% of the portfolio is in financials.Some of the country specific ETFs have higher concentration of financials.
3. Dividend yield is 4.25%.
4. Expense ratio is 0.32%
5. The fund has a total asset base of just $279 M. For the advantage this ETF offers, one would think that the fund may have grown to at least a billion dollars.
6. One can gain exposure to some large companies which trade in the OTC markets. These include E.ON AG(German utility), Bayer AG(German Chemical giant), GDF Suez (French Utility ), RWE AG (German Utility), Air Liqude (French Chemicals), Groupo Danone(French Food company), etc.
7. In current market conditions it may be safer to go with an ETF for large cap stocks than individual stocks – unless one can accumulate many stocks in a variety of sectors.

Just as an fyi.The iShares DJ Euro STOXX 50 ETF with ticker EUE trading in the London Stock Exchange has an asset base of 4.7 Billion EUR.

Links:
Fez-holdings

FEZ-Factsheet

Disclosure: I do not own FEZ.