SAN FRANCISCO (MarketWatch) — Latin America, known to foreign investors as a high-risk but fast-growing region, doesn’t have to be quite so risky. By investing in dividend-paying stocks in Latin America, investors can trim that risk substantially and increase income at the same time.
Dividend stocks in Latin America are, much like those in the developed world, mostly large blue-chip companies from industries such as electric utilities, mining, consumer staples, and financial services.
As the world’s economy slows, investors everywhere have looked to dividend stocks as a “safe haven.”
It’s a way of still playing an active role in the markets, while minimizing your downside risk because dividend stocks tend to have lower volatility and pay income through dividends, in addition to capital gains or losses from any performance of the stock.
Electric utilities and electricity generators in Brazil are one example. Light SA of Rio de Janeiro BR:LIGT3 +1.08% pays its dividends in Brazilian reais and has an annual dividend yield of 7.96 reais per year, while Eletropaulo Metropolitana Eletricidade de São Paulo BR:ELPL4 -4.29% has an annual dividend yield of 28.24 reais.
If you’re uncomfortable with holding Brazilian currency, AES Tiete SA AESAY +1.63% , an electricity generator named after the river that runs through São Paulo, pays its holders of its American Depositary shares in US dollars, for an annual dividend yield of $10.91.
By the way, the Tiete, once known as the filthiest river in the world in part because it runs through a city of 20 million people, has since been cleaned up substantially.
CPFL Energia SA CPL +1.77% is another utility company in Brazil that pays its shareholders in US dollars, and this year is expected to post an annual yield of $7.19.
Some of the other major dividend stocks in the region are Telefonos de Mexico MX:TELMEXA 0.00% , with an annual dividend yield of 5.44 Mexican pesos; ENTEL of Chile with an annual dividend yield in Chilean pesos of 5.65; CAP SA, a mining company from Chile, with an annual dividend of 3.15 in Chilean pesos.
Others that are noteworthy are CCR SA BR:CCRO3 +1.10% , a toll-road operator in Brazil, which had an annual dividend yield of 2.76 in Brazilian reais; and Redecard SA BR:RDCD3 +0.15% , an issuer and acquirer of credit cards in Brazil.
Tractebel Energia SA TBLEY +0.74% , which is based in Florianopolis, Brazil, but generates energy throughout the country, has an annual dividend yield of $3.28. But be careful when investing in dividend stocks in Latin America.
Because so many people have had the same idea that you have, in the U.S. dividend stocks can be expensive and investors can sometimes overpay for their shares.
The same thing goes when investing in Latin America. As a foreign investor, it’s easy to forget that local investors are thinking the same thing you are — that dividend stocks are attractive because of the global economic slowdown. That sentiment can sometimes push stock prices higher.
In short, think before you buy and always take the stock price into consideration, in terms of its historical price and relative to its industry.
And talk to your accountant before buying Latin American dividend stocks in particular to determine what the tax implications might be. Note: To avoid conflicts of interest, I don’t invest directly in Latin American securities.
marketwatch.com
Dividend stocks in Latin America are, much like those in the developed world, mostly large blue-chip companies from industries such as electric utilities, mining, consumer staples, and financial services.
As the world’s economy slows, investors everywhere have looked to dividend stocks as a “safe haven.”
It’s a way of still playing an active role in the markets, while minimizing your downside risk because dividend stocks tend to have lower volatility and pay income through dividends, in addition to capital gains or losses from any performance of the stock.
Electric utilities and electricity generators in Brazil are one example. Light SA of Rio de Janeiro BR:LIGT3 +1.08% pays its dividends in Brazilian reais and has an annual dividend yield of 7.96 reais per year, while Eletropaulo Metropolitana Eletricidade de São Paulo BR:ELPL4 -4.29% has an annual dividend yield of 28.24 reais.
If you’re uncomfortable with holding Brazilian currency, AES Tiete SA AESAY +1.63% , an electricity generator named after the river that runs through São Paulo, pays its holders of its American Depositary shares in US dollars, for an annual dividend yield of $10.91.
By the way, the Tiete, once known as the filthiest river in the world in part because it runs through a city of 20 million people, has since been cleaned up substantially.
CPFL Energia SA CPL +1.77% is another utility company in Brazil that pays its shareholders in US dollars, and this year is expected to post an annual yield of $7.19.
Some of the other major dividend stocks in the region are Telefonos de Mexico MX:TELMEXA 0.00% , with an annual dividend yield of 5.44 Mexican pesos; ENTEL of Chile with an annual dividend yield in Chilean pesos of 5.65; CAP SA, a mining company from Chile, with an annual dividend of 3.15 in Chilean pesos.
Others that are noteworthy are CCR SA BR:CCRO3 +1.10% , a toll-road operator in Brazil, which had an annual dividend yield of 2.76 in Brazilian reais; and Redecard SA BR:RDCD3 +0.15% , an issuer and acquirer of credit cards in Brazil.
Tractebel Energia SA TBLEY +0.74% , which is based in Florianopolis, Brazil, but generates energy throughout the country, has an annual dividend yield of $3.28. But be careful when investing in dividend stocks in Latin America.
Because so many people have had the same idea that you have, in the U.S. dividend stocks can be expensive and investors can sometimes overpay for their shares.
The same thing goes when investing in Latin America. As a foreign investor, it’s easy to forget that local investors are thinking the same thing you are — that dividend stocks are attractive because of the global economic slowdown. That sentiment can sometimes push stock prices higher.
In short, think before you buy and always take the stock price into consideration, in terms of its historical price and relative to its industry.
And talk to your accountant before buying Latin American dividend stocks in particular to determine what the tax implications might be. Note: To avoid conflicts of interest, I don’t invest directly in Latin American securities.
marketwatch.com
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