Seeking Alpha
Solar, utilities, quantitative analysis, dividend investing
Profile| Send Message|
( followers)  

Latin America continues to offer strong growth prospects as noted by strong performance from numerous ETFs focused on the region. However, there are specific stock opportunities that can also provide strong dividends. This article will focus on identifying American Depository Receipts (ADRs) for high yielding Latin American stocks. There are also potential ETF and other options that could provide income, but I'll ignore those for this article. The initial screen was to simply identify ADRs for these countries. I pulled from several web resources to compile an initial list of almost 80 companies of which around 50 paid some sort of dividend. The following 15 stocks had the highest yields:

Latin American Dividend Stocks
TickerName Market Capitalization ($ Millions)Dividend YieldCountryIndustry
PVDAdministradora de Fondos de Pensiones-Provida, S.A. 1,629 7.3%ChileFinancial
YPFYPF Sociedad Anonima 16,600 6.8%ArgentinaOil & Gas
APSAAlto Palermo S.A. 44 6.4%ArgentinaReal Estate
BFRBBVA Banco Frances 1,967 6.2%ArgentinaBanking
CPLCPFL Energia S.A. 13,244 6.1%BrazilUtility
TFONYTelefonos de Mexico - Series A 15,799 4.7%MexicoTelecom
TMXTelefonos de Mexico - Series L 8,543 4.7%MexicoTelecom
SCCOSouthern Peru Copper Corporation35,0804.4%PeruMining
BLXBanco Latinoamericano de Comercio Exterior, S.A. 478 3.9%PanamaBanking
OMABGrupo Aeroportuario del Centro Norte 625 3.9%MexicoTransport
IRSIRSA Inversiones y Representaciones 822 3.7%ArgentinaReal Estate
SIDNational Steel Corporation 24,574 3.6%BrazilSteel
BCHBanco De Chile 11,477 3.5%ChileBanking
PACGrupo Aeroportuario del Pacifico 1,954 3.4%MexicoTransport
ASRGrupo Aeroportuario del Sureste 1,560 3.4%MexicoTransport
Most data is provided by services. It was downloaded on March 26, 2011 and reflects closing stock prices from March 25, 2011. Data was also matched against Yahoo!Finance. In the case of discrepancies, actual dividend yields based on available dividend history from Yahoo! Finance were used. I calculated a 4.4% for BCH but Zacks showed a 3.5% and Yahoo!Finance showed a 3.4% so I kept the 3.5%. It should also be noted that market capitalizations differ between the two sources. With the exception of YPF and APSA all market caps are from

The first and most critical observation is that two separate data sources showed significant differences in dividend yields. This is most likely due to the fact the many Latin American ADRs pay dividends based upon some set ratio to actual net income, resulting in variable cash amounts of dividends. Payment dates and timing often appear to be irregular as well. Some companies showed consistent quarterly payments while others showed slight irregularity. Still other companies showed differing numbers of dividend payments from one year to the next. A simple glance at the dividend yield without scrutinizing the dividend history could result in disappointment later on. A great current yield might simply be the result of an abnormally good year. Furthermore, a great yield might also be on the downturn if the actual dividend amounts are declining from one year to the next. Even the data sources varied. For example, showed a 5.1% yield for PAC while Yahoo!Finance showed 1.7%. My calculation of the historical 12 month dividends suggested the 3.4% yield that I used in the table.

BBVA Banco Frances
BFR made the list with a 6.2% dividend yield; however, this was driven by its most recent payment - $0.682 per share with an ex-dividend date of June 8, 2010. Based on the recent closing price of $11.00 per share gives a 6.2% yield. However, there was no dividend in 2009 and the 2008 payment was $0.328 per share and the 2007 payment was $0.185 per share. There were also no dividend payments in 2002 and 2003.

BFR Recent Historical Dividends
DateDividend ($)Price ($)Implied Yield (%)

Source: Yahoo!Finance

This highly irregular stream of yields should signal caution for any investor. Not only are the payments irregular, but the yields are highly variable.

CPFL Energia S.A.
CPL, a Brazilian utility, also showed a similar situation.

CPL Recent Historical Dividends
DateDividends ($)Trailing 12 months dividends ($)Price ($)Implied Yield (%)
5/2/20050.367 NA23.75NA
Source: Yahoo!Finance

The first observation is that dividends are paid on a pretty regular frequency with ex-dividend dates in early March and mid August. The next note is that the amounts have been increasing recently the yields are declining from a peak of 11.1% in spring of 2009 when the world markets were at their nadir. Since then the stock has recovered to over $80 a share. The yield is currently around 6.1% based on a closing price of $82.58.

Banco Latinoamericano de Comercio Exterior, S.A.
BLX, a Panama based bank, had a high yield. It also shows very regular payments based on ex-dividend dates. However, it does carry a small market capitalization. This might be offset by a promising dividend history as noted below:

BLX Recent Historical Dividends
DateDividendsTrailing 12 month dividendsClosing priceImplied Yield

Source: Yahoo!Finance

I had pulled additional data which showed that BLX shifted to quarterly dividends around 2001, but then did not pay dividends in 2002 and 2003. Since then it has resumed consistent quarterly payments of consistent amounts.

Southern Peru Copper Corporation
SCCO could be an interesting opportunity given the recent strong performance of copper. It also shows consistent quarterly dividends from a timing perspective. However, the amounts have varied over the past two years.

SCCO Recent Historical Dividends
DateDividendsTrailing 12 month dividendsPriceImplied yield

Source: Yahoo!Finance

The first observation is that the yield has tracked copper prices pretty closely. As copper has risen from its lows in 2009, the yield has tracked upward. SCCO has shown a slight price decline to $41.27 per share since the last dividend. This gives a yield around 4.4%

Identifying Latin American dividend stocks requires quite a bit of digging to ensure that the dividends are consistent and timely. The list provided represents a good starting point for investigation. Of the stocks that I reviewed in more detail, SCCO and CPL show good promise. I would probably avoid BRF. BLX looks interesting but as a smaller banking stock, I might just pass to focus my research on other utilities. Furthermore, simply looking at historical dividends does not imply that the company is fundamentally sound. Additional research would be required prior to making any investment decision.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: This article is for informational and educational purposes only and shall not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security.

Source: The Challenges of Selecting High Yielding, Latin American Dividend Stocks