by Jonathan Yates
With the report that the China's GDP has just fallen to 7.6%, dividend paying stocks from the People's Republic are becoming more attractive.
The exchange traded fund for China, iShares FTSE 25 (FXI), is down almost 6% for the last week of market action and more than 20% for the last year. It is likely to fall even more. That will make Chinese dividend paying stocks even more attractive as the yields will be higher from a falling share price. The future is bullish for China, so these stocks will rebound.
China Mobile (CHL) should be at the top of any list of dividend paying stocks from the People's Republic. China Mobile is the world's biggest mobile phone company in terms of subscribers. The company has a bullish future as most mobile phone growth will be in emerging market nations. It pays a 3.92% dividend with a 43.14% payout ratio, the amount of earnings needed to finance the dividend. That leaves ample cash flow to increase the dividend or initiate share repurchase programs.
By comparison, the average dividend for a member of the Standard & Poor's 500 Index is around 2%, with the historic dividend payout ratio being around 50%.
PetroChina (PTR) is Big Oil with a market capitalization of $220 billion. It also has a big dividend of 4.27%. With growth slumping around the world and oil demand falling, PetroChina is off by 13.53% for the last quarter of market action. It will recover when the global economy rebounds as it is bulking up operations around the world. Now trading at around $120 a share, the mean analyst target price for PetroChina over the next year is $159.67.
On October 16, 2008, legendary investor Warren Buffett wrote an op-ed for The New York Times entitled "Buy America. I am." In it, he advised investors that, "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful."
Now is the time to "be greedy when others are fearful" about Chinese dividend paying stocks. China has the highest savings rate in the world and foreign reserves of over $3 trillion -- more than any other country. It is the second biggest economy in the world, the biggest exporter, and the biggest importer of many products. There are many solid dividend paying stocks in the People's Republic. When Chinese dividend paying stocks fall due reasons not to do with the qualities of the company, it is time to "be greedy."