Today we’re looking at a high yield stock that’s being pitched by Carla Pasternak for her new High-Yield International newsletter that looks for big dividends overseas.
High Yield International has been around for a while, as far as I can tell — it used to be edited by Nick Lanyi, so perhaps he’s moved on to bigger and better things and they’re just “relaunching” with Carla as editor, I don’t know exactly what happened. Keeping track of the newsletter closings, launches, and editor changes is a nearly impossible task — that’s the joy of the newsletter world, if it doesn’t work you can change it up overnight and >bam!< a new newsletter is born that happens to have the same title and goal as the one that existed before, but with a clean slate that erases any disappointing performance. That might not be what happened here, but I've sure seen it plenty of times in the past. But that's water under the bridge, as they say ("they" being the cliche lovers and lazy writers of the world -- not me, of course) -- what is Carla touting as her high dividend pick today? Here's the first part of the pitch, which includes a few clues:
“Would you believe the map the world has used for five centuries is wrong?
“The Mercator projection shows Brazil about the same size as Alaska. That’s a distortion. Brazil is actually almost the size of the United States — and six times bigger than our largest state. And right now, I’d say your profit potential is also about six times bigger in Brazil, too.
“Brazil: Rewriting the Investment Map
“Brazil is by far the largest nation in South America, and its $1.8 trillion economy ranks 10th in the world. That’s larger than Russia’s, India’s, Australia’s or Mexico’s.
“After emerging from the global crash with barely a scratch, Brazil is on track to resume its rapid economic expansion at a +4.1% annual clip through 2012. The U.S. will be lucky to grow half that fast.
“Good things happen to investors in markets where economic growth is strong….
“Capturing Double-Digit Yields in Brazil
“I love capital gains as much as the next guy. But if you’re an income investor, growth alone isn’t enough. You want to lock in a high dividend stream, too.
“Brazil is a feast-or-famine market for dividend lovers. Only 41 companies in Brazil pay dividends higher than 7%. But of those, the average yield is 11.6%! And although these companies are household names in Brazil, few Americans even know they exist.
“But our High-Yield International readers sure do. In recent months, editor Carla Pasternak has uncovered Brazilian stocks with dividend yields of 7.5%, 8.7% and 9.4%. But those are all tiny compared to her latest find. After two weeks of research, Carla recently discovered a fast-growing Brazilian telecommunications company with a 22.3% yield.”
So there we have it — a telecommunications company in Brasil, one that apparently has paid out handsomely in the past year. What could it be?
Well, according to the musings of the mighty Thinkolator, this appears most likely to be …
Tele Norte Leste (TNE for the ADR)
Tele Norte is the biggest fixed-line telecom in Brasil and the third or fourth largest wireless carrier — as with more developed countries, the fixed lines provide the monopoly earnings power and stability (with some growth from broadband) and the wireless business provides the growth. They operate under the Oi brand name for both wireless and wireline services.
And yes, I’m using both Brasil and Brazil as I type today — Kind of like throwing around both Beijing and Peking, I am both lazy and open-minded.
Tele Norte recently bought one of their big competitors, Brasil Telecom (BTM and BRP) — Brasil Telecom also trades as an ADR in NY, and you can still actually buy the shares, though now you’re technically buying shares in a subsidiary (it also pays a nice dividend, not sure whether the shares will eventually be consolidated or not).
Now what about that dividend? This is one of those cases where it’s probably technically accurate to say that it paid out 22% in the past year, but also possibly misleading — shareholders should probably expect somet