Back in March, when the markets were plummeting and Goldman’s senior execs were jumping from skyscrapers (well, not really, but given a choice of descending markets or descending executives, the choice would have been an easy one…) we started buying a number of quality, high-dividend companies around the world that trade on US markets, but whose revenues are earned in other currencies.
I feel about the US Dollar like Tevye (“Fiddler on the Roof”) felt about being poor: “I realize, of course, that it's no shame to be poor. But it's no great honor either! So, what would have been so terrible if I had a small fortune?"
I don’t dislike US Dollar investments; I am, however, a wee bit embarrassed for my country that we have elected idiots and jackals who have debased what was once The Almighty Dollar. Of the 80 or so countries I have lived in or visited, in at least 70 I could once have paid in dollars rather than local currency because it was a bastion of strength. It’s no great shame to pull out Dollars today – but it’s no great honor either…
So where might we want to place at least some of our clients’ hard-earned money if the Dollar continues to bump along right about where it is, while slowly losing value over time versus other currencies? (Our government says it wants a strong dollar. They’re lying. What they really want is a dollar juuusssstt strong enough to keep other nations and investors from abandoning the Dollar in droves but not so strong that it makes our exports more expensive.)
That leads me to believe that, absent a skyrocketing Dollar, the markets will not disintegrate and commodities (and equities in general) will, after a normal correction, move higher. What will get us through a decline and leave us positioned well for any upside? I think quality dividend-paying stocks will suffer the least in any decline and will be in demand during any advance. Most of the companies I’ve previously written about fit this bill. Many of those previously recommended still represent great value today, though some are already up 40-50% and do not warrant new commitments.
The largest percentage of those strong dividend-payers have been Canadian companies. That’s still where the bulk of our non-US holdings are. But in addition to all the great pipeline companies and royalty firms in Canada, here are a few other fine dividend-payers that, like our previously-featured Canadians, will provide global diversification and, if the dollar drifts lower, additional profits when repatriated into US Dollars. I have selected one company from each of seven different countries in order to provide both geographic and currency diversification.
Alphabetically, by country, we have an oil and gas company from Argentina, a bank in Australia and New Zealand, a hydroelectric power company in Canada, a French telco, a coal-to-liquids giant from South Africa, a telecom from Switzerland, and an electricity and gas transmission firm from the UK.
The oil and gas company is Argentina’s YPF (YPF), the bank is Australia and New Zealand Banking (OTC:ANZBY), the hydroelectric power company is Canada’s Brookfield Renewable Power Fund (BRPFF.PK), the first telco is France Telecom (FTE), the coal-to-liquids giant is South Africa’s Sasol (SSL) the Swiss telco is Swisscom (OTC:SWZCF), and the electricity and gas transmission behemoth is National Grid (NGG).
Seven companies, denominated in seven different currencies – the Argentine Peso, the Australian and Canadian Dollar, the Euro, the Rand, the Swiss Franc and the British Pound. Yet all are traded on US exchanges in US dollars.
YPF is actually a unit of Repsol YPF (REP) the Spanish oil and gas exploration, development and production company – but it enjoys considerable autonomy and has its own float and listing as an ADR on the NYSE. In addition to running its own E&P program, YPF also refines, markets, and distributes oil, petrochemicals, natural gas, liquid petroleum gas, and bio-fuels. The company has reserves of 1.1 billion barrels of oil equivalent. I like their prospects offshore where their 3100-mile coastline is barely explored and for their dividend (paid twice a year like most foreign stocks), priced to yield 8.1%.
I wrote an SA article about ANZBY back on March 31 (here). Nothing has changed except the price, which ran from $11 the day I wrote about it to $23 by November. It has since backed off to $18 and change, where it yields 5.5%. Here's how I concluded that article:
With its extensive experience in the Australian agricultural sector, I see ANZBY as a natural fit in rural China, at a time and place where the Chinese government is desperate to initiate rural reform… They already hold a 20% stake in two Chinese banks, the Shanghai Rural Commercial Bank and Bank of Tianjin. Finally, with cash in the till, I wouldn't be surprised to see ANZBY pick up some US or European banks' Asian operations for next to nothing. If I had to hazard a guess, HSBC (HBC) and Royal Bank of Scotland (RBS) might come to mind.
A lucky guess on my part -- they just announced they were buying the Pacific business of RBS…
BRPFF was GLHIF – Great Lakes Hydro Income Fund – until this fall. They changed their name to reflect the fact that they are no longer just hydro, but produce electricity from renewable resources, including the 27 hydroelectric generating stations they indirectly own, operate and manage as well as their latest acquisition, a wind turbine farm in southern Ontario. The Fund’s installed capacity is now 1,255 megawatts producing 4,596 gigawatt hours annually. They yield 6.5% and pay their dividend monthly at just under a dime a share. BRPFF -- just today -- was added to the S&P/TSX Composite Index.
FTE does what all telephone companies do: use their monopoly status to mint money. In this case, France Telecom provides service, through various subsidiaries, in France, the UK, Spain, Poland, and lots of places you might be surprised to see a French firm operating -- like Kenya. It also has a 50-50 joint venture agreement with Deutsche Telekom AG (DT). FTE yields 6.8% and provides steady cash flow.
I’ve also written more than once about SSL, most recently just last week (here). I noted there,
One way to avoid importing oil and clean up the environment is to use Coal-to-Liquids [CTL] technology, where pollutants are removed at the source. The worldwide leader in this technology is Sasol (SSL), the world's largest producer of synthetic fuels, both CTL and GTL (Gas-to-Liquids.)
SSL yields 4.4% and is sitting in the sweet spot of research and development for cleaner coal technologies.
What do telco monopolies do? Oh, right, they mint money. SWZCF -- Swisscom -- is no exception. Offering telecommunication services primarily in Switzerland and Italy, they do things quietly, conservatively, and astutely. Hey – they’re Swiss. Yielding 4.5%, they report their revenue in Swiss francs…
Finally, NGG also yields 4.5% but earns its money distributing electricity and gas worldwide. National Grid owns the high-voltage electricity transmission network in England and Wales and operates the system across Great Britain. It also owns and operates the high-pressure gas transmission system in Britain and distributes electricity to some five million customers in Massachusetts, New Hampshire, New York and Rhode Island. (An especially lucrative business this week...).
Seven companies, seven different currencies. You could do far worse if you are serious about diversifying away from the dangers of over-reliance on a single currency like the US Dollar. There are many more, of course, some of which I’ve discussed previously, others I will discuss in the future.
In conducting your own research on these firms, I encourage you to visit the companies' websites, paying particular attention to the investor presentations and the most recent annual and quarterly reports. My first stop is always the footnotes. That’s where they divulge what they legally must, but in a font they hope you won’t pull out your magnifying glass to read.
A Merry Christmas and a Healthy New Year to All!
Author's Disclosure: We and/or clients for whom it is appropriate are long every one of the stocks above. (Well, almost every one. We’re not long money center banks like RBS and HBC. We’re investors, not masochists.)
The Fine Print: As Registered Investment Advisors, we see it as our responsibility to advise the following: We do not know your personal financial situation, so the information contained in this communiqué represents the opinions of the staff of Stanford Wealth Management, and should not be construed as personalized investment advice.
Also, past performance is no guarantee of future results, rather an obvious statement if you review the records of many alleged gurus, but important nonetheless – for example, our Investors Edge ® Growth and Value Portfolio beat the S&P 500 for 10 years running but will not do so for 2009. We plan to be back on track on 2010 but then, “past performance is no guarantee of future results”!
It should not be assumed that investing in any securities we are investing in will always be profitable. We take our research seriously, we do our best to get it right, and we “eat our own cooking,” but we could be wrong, hence our full disclosure as to whether we own or are buying the investments we write about.