5 dividend picks
CPFL Energy (CPL, news) (CPFE3.BZ in São Paulo) is Brazil's largest private utility, with 13% of the national market. About 75% of operating income comes from regulated electricity sales with the company's business concentrated in the economically strong São Paulo and Rio Grande do Sul states. It's difficult at this point to say what the course of the Brazilian real will be over the next 10 years. The administration of President Dilma Rousseff shows signs of slipping back from recent progress on controlling budgets and inflation, but I still think Brazil's course is set toward credit-rating upgrades and a solid currency. I wouldn't overweight Brazilian stocks in a long-term income portfolio now. But this one, with a yield of 6.5%, seems a reasonable risk.
Keppel Land (KPPLF, news) (KPLD.SP in Singapore) is the property arm of Singapore's Keppel Group. The company's portfolio of Singapore properties includes office towers, resorts, hotels, residential properties, retail centers and industrial buildings. After the Swiss National Bank pegged the Swiss franc to the euro, there was a brief market flirtation with the Singapore dollar as an alternative before traders decided that Singapore's currency wasn't liquid enough to handle their huge bets. But the assessment of the strength of the currency was correct. The shares now trade near a 52-week low and yield 6.1%.
Statoil (STO, news) (STL.NO in Oslo) gives you double protection against inflation and a sinking dollar. The company's product -- oil -- is priced in dollars and goes up in price when the dollar falls. And Norway's krone is backed by one of the world's most fiscally cautious governments and central banks. The shares currently yield 5.1%.
Svenska Handelsbanken (SVNLF, news) (SHBA.SS in Stockholm) is Sweden's second-largest bank and one of the most conservatively run, with a history of extremely low loan losses. The bank's Tier 1 capital ratio is 15%. The shares currently yield 6.1%. Sweden's krona is likely to stay one of the world's stronger currencies: The central bank is on record saying that it doesn't see the need to depress the currency -- even if Swedish exporters complain about losing customers because of the exchange rate.
Westpac Banking (WBK, news) (WBC.AU in Sydney) has taken a hit recently on fears that Australia's commodity economy might slow with any pullback in China. That's why you can get shares of Australia's second-largest bank by market cap at a 7.8% yield. A 4.4% pullback in the Australian dollar earlier this week has taken some of the short-term currency risk out of buying the shares -- and the commodity link argues that the Australian dollar will be one of the world's stronger currencies over the next 10 years. The bank had a Tier 1 capital ratio of 9.5% in March.
Why not more than five?
Many of the stocks that combine high yields with stock currencies trade only in their home markets (and very infrequently in the United States.) There's Bradken, for example. This Australian manufacturer of mining supplies pays a 7.7% dividend, but the shares trade only in Sydney (BKN.AU).
And some of the stocks that look like they'd be natural for this portfolio aren't necessarily likely to keep their dividend payments at current levels for a 10-year period. Enerplus (ERF, news), for instance, is an attractive Canadian producer of oil and natural gas from shale formations in Western Canada, North Dakota, Montana and elsewhere. The company, which in 2010 converted from an income trust to a corporate structure, pays an 8.1% dividend yield, but the cash flow for that dividend comes from the conventional oil and gas assets that the company is selling off to get the capital to invest in its unconventional holdings. What's the cash flow picture in 10 years? I can't tell you.
So, it is hard to find these opportunities. But I wanted to give you the ones I'd found so far. And I'll keep looking.
At the time of publication, Jim Jubak did not own or control shares any of the companies mentioned in this column in his personal portfolio. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not now own positions in any stock mentioned in this post. The fund owned shares of Statoil and Westpac Banking as of the end of June. For a full list of the stocks in the fund as of the end of March see the fund's portfolio here.
Jim Jubak's column has run on MSN Money since 1997. He is the author of the book "The Jubak Picks," based on his market-beating Jubak's Picks portfolio; the writer of the Jubak's Picks blog; and the senior markets editor at MoneyShow.com. Get a free 60-day trial subscription to JAM, his premium investment letter, by using this code: MSN60 when you register at the Jubak Asset Management website.
Click here to find Jubak's most recent articles, blog posts and stock picks.
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Jonathan Winters once remarked that life was a [crud] sandwich, but it didn't taste too bad if you had enough bread.
Groucho Marx once was asked how he hope to make any money with his whole portfolio in very low interest short term bonds. "You get rich if you have enough of them," he answered.
Today one cannot plan to make a plausibly attainable amount of capital work very well. And as Mr. Jubak notes, even today's dividends cannot be counted on to be there tomorrow. (At least interest rates won't go much below their current near-zero.)
The only solution is the one that will afforded to only a relatively small group: enough principal that the return on it matters not so much.
I like reading Jubak's articles. He seems to put a lot of research and thought into them. I like his macro economic perspective as well. I have a premium membership on Morningstar and Westpac looks intriguing.
My caveat to all of this is that Jubak's own fund, which started on 6/30/2010 isn't doing well relative to its benchmark. So that makes me a little scared to take his recommendations...
If you are still employed and below the income cutoff, you cut put money into a Roth IRA. I have about 40% of my retirement in my Roth and it is great because I can trade as much as I care to. No capital gains or taxes to worry about as it is in a Roth! Only downside is that you can't write off a loss!
Accountants fear dividends.
They tell investors they will pay taxes.If you don't pay taxes they have done their job. Incorrect,if you have no income,you can avoid paying taxes.A good accountant will help you increase income.
They tell the corporations dividends will reduce their cash hoard which will make it harder to fend off hedge fund short selling.Why would people short sell a profitable company?Here again there's an assumption you must avoid at all costs short selling,instead of seeing a loss of profits as a sign or your product's faults,and your terrible investments in research and development,or you inability to listen to your salesmen who have been warning you about their failures this past year.
This kind of deliberate misinformation clouds the real reason:they're being paid to find depreciation allowances and tax sheltered vehicles.
They also fear a simplification of income forms for their private clients. How hard is it to add together your dividend income versus trying to figure out capital gains tax liabilities.One youc an do with a calculator,the other requires billable hours.
They seem to be good retirement income stocks for sure , note none are short term investments , wish i had read this before i bought my short term stocks and put money into i.r.a now with the extra 10% gov penalties its hard to trade i.r.a @.05%-1.0 % to go after the 5 % plus dividends', which would have to pay out a ton more in ten yrs,
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