10 International Dividend Paying Growth Stocks

The list below was largely inspired by two Seeking Alpha articles I read recently, "Dividend Investing vs. Trading" and "Altria, Value Play or Value Trap?" In the former, author Dividend Growth Investor reminds us that long-term holding and reinvesting dividends from industry leaders is the historical "holy grail" of investment strategies. Equally influential were many of the comments made in response to the article, which were overwhelmingly in concordance with the author's sentiments. My other reference, written by Ryan Vanzo, warns investors of the risks associated with a high-yielding, financially sound company with signs of negative growth in the future.

Currently, about half of my stock portfolio is comprised of dividend payers in what I consider safe and growing industries. The other half is deep value growth plays, such as profitable China smallcaps trading at under half their book value. The gambler in me is very fond of the latter, and in no way has my confidence declined in any of my holdings. I do, however, have a family history of high blood pressure, not to mention a strong appreciation for sleeping at night. Either way, 6 months from now I intend for some combination of the companies below to make up 85%+ of my holdings.

The only criteria for my list was at least one annual dividend. Beyond that, generally equally weighted are percentage yield, valuation, financial strength and future growth prospects. My opinions on future growth eliminate most manufacturing, retail, banking and real estate stocks from consideration.

10. Indonesia Telecom (TLK): An ETF may be a better way to play this agriculturally wealthy and rapidly growing nation, but this telecom provider operates more profitably than most international counterparts.

9. Guangshen Railway Co (GSH): Railroads are a major target of China's stimulus package as it transforms itself into a more self-sufficient consumer. Guangshen grew revenues and income over 10% year-over-year in Q1 09 and trades at book value.

8. Consolidated Water Co (CWCO): This is a current holding of mine and I don't expect that to change in the next decade. CWCO is a Bermuda-based leader in desalination and trades at a huge discount to less profitable American competitor ERII, which does not pay a dividend. Our need for desalination is being realized and will never stop growing.

7. Turkcell Iletisim Hizmetleri (TKC): This Turkish telecom provider won't pay its next dividend for a year, but operations have held up well during the economic downturn. This is an interesting currency hedge with a yield over 6% and valuation not far up from 4-year lows.

6. Gold Fields Ltd. (GFI): Inflationary worries have the world's most gold-rich country garnering more attention from investors than ever before. This profitable miner pays a modest quarterly dividend and trades at a book value discount of over 50% to Anglogold (AU) or Randgold (GOLD).

5. China Mobile (CHL): China's telecom giant boasts a PEG ratio of 0.42 and hasn't recovered in price nearly as much as the country's other industry leaders. Throw in a 4% yield and nationally subsidized infrastructure growth and this stock looks very ripe.

4. Veolia Environment (VE): This highly leveraged, highly diversified world leader in wastewater management and environmental services trades at just over book value, 70% off 52-week highs. Annual dividend yield is 5.5%.

3. CPFL Energia (CPL): This Brazilian electric utility recently reported first quarter net income growth of 6.5% and has a record of distributing profits as dividends. Over $11/share has been paid to shareholders over the last 3 years.

2. Sociedad Minera y Quimica de Chile (SQM): Almost 200% up from October lows this is still a screaming buy. SQM mines the world's most abundantly accessible lithium and Chile boasts South America's most concentrated gold deposits. Earnings grew 179% in 2008 and this company operates at nowhere near capacity.

1. Companhia de Saneamento Basico do Estado de Sao Paulo (SBS): Sao Paulo's leading water utility company trades at 64% of book value. Dividends are irregular, but have been paid no less than semi-annually for the last 4 years. Shareholders of record on May 29 will receive a recently announced $0.47/share payment.

In case it's not already clear, I believe that water utility companies are terribly undervalued. Water is the most important resource for every person in every country. There are dozens of profitable water utilities that operate regionally in the US and I consider most of them great investments. Brazilians are simply greater consumers than us and SBS is both relatively and historically much cheaper than domestic options in the sector. Additionally, US water companies face greater competition and regulation, inhibiting expansion to other regions, nor are they as diversified as VE.

Disclosure: Long VE, SBS, SQM, CPL, GFI, CWCO.

Comments

[batman2:]

SQM - what does Gold have to do with this... isn't this company primarily involved in producing plant nutrients and chemicals?

May 25 12:20 PM

[123z:]

I agree with your comments on water. What is your opinion of Cascal (HOO) which appears to me to be an excellent stock which is selling for the price of a penny stock? The only thing wrong with it that I can find is a small float which might make it volatile, but as a long term investment the float seems less important.

May 25 01:23 PM

[Danny Furman:]

123z,
I wrote an article about Cascal less than a month ago. The Company seems to have excellent customer relations and operates all over the globe. I bought shares in April at 2.67 and one day, a week or two ago, the stock shot up to 4.25. I got out at 4.06, as at that valuation I believe any of the stocks in the list above are better options. Not for potential, but there is a major upcoming concern for HOO. In 2011 or 2012 (I can't remember) Cascal's non-compete with Biwater, its parent company, expires. Part of me believes Cascal has won over clients and may even steal a few from Biwater. Still, there is a real risk of the bigger company undercutting Cascal.

On May 25 01:23 PM 123z wrote:

> I agree with your comments on water. What is your opinion of Cascal
> (seekingalpha.com/symbo...) which appears to me to be an
> excellent stock which is selling for the price of a penny stock?
> The only thing wrong with it that I can find is a small float which
> might make it volatile, but as a long term investment the float seems
> less important.

May 25 03:26 PM

[Alan Young:]

nice article with lots of good ideas. My only quibble is that I don't think ERII competes with CWCO: unless I am misinformed, CWCO markets only in the Caribbean, while ERII has projects throughout the world.

May 25 07:27 PM

[Danny Furman:]

Ouch... wrong twice here. I assumed incorrectly that lithium is mined as metal ore... stupid cat!!
Thanks for the comment Mr. Young, I always respect and appreciate what you have to say. I did misuse the word competitor and ERII's positions in China and Spain do earn it a significant valuation boost.
Perhaps it was because they loaded up on shares in March, but ERII insiders did some major selling recently.
Ultimately I like both stocks fundamentally, however I see better value in CWCO.
Lastly, increased demand for desalination could make the two competitors in the future and expand the operations of both companies. For CWCO the transition from the British Isles to the British Mainland doesn't seem like a stretch.

May 25 08:09 PM

[tc1:]

Thank you for this article, Danny, but I noticed in the statistics on SBS, your #1 pick, that it has a huge amount of debt and also the number of short sellers has fully DOUBLED from last month to this month, a whopping 603k shares out of the 911k shares outstanding. Can you say more about this, please?
Thanks again for the article!

May 25 11:28 PM

[Danny Furman:]

tc1,
I hope you accidentally looked at the wrong stock! I see 0.54% of the float on SBS as short, but since it is up over 100% since March that may be increasing of late.
Water utilities are very capital intensive, but most operate extremely profitably because rates are frequently increased and demand increases with population growth. Interest coverage is low simply because it can be.
If you want to see a water utility with real debt problems, look at American Water Works (AWK).

May 26 12:03 AM

[Albert Meyer:]

Yep... I'm on the same page with you on TLK, TKC, CHL and CPL. I"m not familiar with the others, but will do my due diligence on them. Thanks.

May 26 09:41 AM

[doubleguns:]

Hard to sell gimicks.


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May 26 01:36 PM

[Wisdom vs. ...:]

tadair, you can not sell a $10k solar sustem for $20k, the roi on the electric savings would be something like 2.5%, stupid

May 29 07:53 PM

[donaldrlambert:]

I agree that water is a good investment, but can't find "dozens" of such companies operating in the US to invest in. I have owned some CWCO for years, as well as about nine US water companies. I'd sure like to get hold of that expanded list.

[e-mail]

Jun 04 06:21 AM

[Danny Furman:]

this article includes about half of them:
seekingalpha.com/artic...

Jun 09 09:54 PM