Five Emerging-Market Stocks With Big Dividend Yields and Expected Payout Growth

As yields rise on stocks and Treasury bonds, the 2.2% dividend yield on the S&P 500 begins to look more anemic, although anyone who has been invested in the index since the start of the year won’t mind the 6% price appreciation. That aside, if you’d like more income than is on offer from the S&P 500, HSBC Global Research highlights five emerging-market stocks that trade on U.S. markets and yield between 3.9% and 6.2%:

Banco Santander (Brasil) (BSBR), asubsidiary of the Spanish bank, dividend yield 6.2%.

Companhia de Saneamento Basico do Estado de Sao Paulo (SBS), a Brazilian provider of sanitation services, dividend yield 5.7%.

The South African mining concern Gold Fields (GFI), dividend yield 4.1%.

Companhia Paranaense de Energia, a Brazilian electric utility (ELP), PE ratio 4%.

Huaneng Power International (HNP), a Chinese utility, dividend yield 3.9%.

What is apparent in the chart below, apart from the fact that some companies’ names sound better in the original Portuguese, is how wide the gaps in yields are between the five stocks and the SPDR S&P 500 exchange-traded fund (SPY) that tracks the index.

SBS Dividend Yield Chart

SBS Dividend Yield data by YCharts

What could make these stocks especially useful holdings, if the HSBC analysis is accurate, is the prospect of strong dividend growth, which often accompanies healthy price appreciation. The bank forecasts all five companies to increase their dividends by at least 12% in the next year. Meanwhile, the stocks all carry valuations that are reasonable or better. As the next chart shows, Gold Fields is trading at a PE ratio of 13.8,based on estimates of 2013 earnings, roughly in line with the S&P 500, while the other four trade at multiples well below that of the index – less than half in the case of Saneamento Basico.

BSBR Forward PE Chart

BSBR Forward PE data by YCharts

Conrad de Aenlle, a contributing editor at YCharts, has covered investment and personal-finance topics for more than 20 years, writing for The New York Times, International Herald Tribune, Los Angeles Times, Bloomberg News, Institutional Investor, MarketWatch and CBS MoneyWatch. He can be reached at editor@ycharts.com.

Read more articles about: Investing Ideas  

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