Top 13 Dividend ADRs With Tremendous Returns

by: Insider Monkey

One of the best ways to invest in foreign markets is through American Depository Receipts (ADRs). ADRs provide convenience in terms of trading and reporting of those trades to the IRS. The transaction costs are also much lower than they'd be when buying through local exchanges. You don’t have to worry about the huge spread most banks charge when converting U.S. dollars to the stocks’ local currency. These benefits are visible when trading in emerging markets’ stocks.

Insider Monkey likes investing in emerging markets for three reasons. First, they are usually cheaper than are U.S. stocks based on current P/E ratios. Second, their GDPs grow faster. Third, their currencies are usually undervalued, and they will eventually catch up with the U.S. dollar. For short term investors, emerging markets may be very volatile and losses will be exaggerated during market declines. However, long term investors with diversified portfolios can protect themselves from dollar inflation and benefit from emerging markets’ higher growth rates. We compiled a list of 13 ADRs with tremendous growth rates that also pay fat dividend checks regularly. All companies in this list have market capitalization above $1 billion, a P/E ratio smaller than 20, dividend yield of at least 3% and net income growth of 10% over the last five years.

AFP Provida SA (NYSE:PVD): As a private pension fund administrator located in Chile, PVD also operates in Peru, Ecuador and Mexico. Last year’s dividend yield was 6.91%. Over the last five years the stock gained 200% and had an average dividend yield of 6%.

Banco Bradesco SA (NYSE:BBD): Bradesco Bank operates in Brazil. The company is very profitable and benefits from Brazil’s high economic growth. The average dividend yield over the past five years is 4.5%. The stock price is up 90% since 2005.

China Mobile Ltd. (NYSE:CHL): CHL operates in both mainland China and Hong Kong. The company has the world’s largest subscriber network, which reached 544.2 million in 2010. Average revenue and EPS growth is 20%. The stock price doubled since 2005.

Companhia de Saneamento Basico (NYSE:SBS): This utility company operates in Sao Paulo (Brazil). SBS offers good exposure to the Brazilian market. Net income growth is 27% and stock price is up 150% since 2005.

Compania Cervecerias Unidas SA (NYSE:CCU): CCU is a beverage giant that operates in Chile, Argentina, the Cayman Islands and Liechtenstein. Last year’s dividend yield was 3%. Average revenue and EPS growth is 15%.

Embotelladora Andina SA (NYSE:AKO.A): Andina is also a Chilean beverage giant that produces and markets Coca Cola products in Chile, Brazil, and Argentina. The current P/E ratio of 15 is among the lowest in the sector. Average revenue, net income, and EPS growth is 12%.

Novartis AG (NYSE:NVS): Novartis is a Switzerland based pharmaceutical company that operates on a global scale. Over the last 5 years, dividend yields have more than doubled from 1.6% to 4%. Novartis’ current P/E ratio is 13.

Petroleo Brasileiro SA (NYSE:PBR): PBR is among the largest oil companies in the world. It has an almost exclusive monopoly in oil and gas production in Brazil. Over the last five years, EPS growth is 20% and the stock price is up 90%. Current P/E ratio of 8.5 is also among the lowest in its industry.

PT Telekomunikasi Indonesia (NYSE:TLK): TLK is a monopolistic telecommunication and network services provider in Indonesia. Telkom has a dividend yield of 3.7% and EPS growth of 12%.

Siliconware Precision Industries (NASDAQ:SPIL): Siliconware is a producer of semiconductors in Taiwan. Average dividend yield is 5% and EPS growth is 20%.

Tele Norte Leste Participacoes SA (NYSE:TNE): As a telecommunication service provider in Brazil, Tele Norte’s revenues increased from $15 billion in 2006 to $30 billion in 2009. Dividends also more than doubled from $0.70 (7%) to $1.63 (10.5%) during the same period. Current P/E ratio of 9.95 is below the industry average.

Telefonica SA (NYSE:TEF): As a Spain based telecommunication giant with a market capitalization of $113 billion, Telefonica operates in Europe and Latin America. Between 2006 and 2010, dividends tripled from $0.59 to $1.72. Last year’s dividend yield was 6.76%.

Turkcell Iletisim Hizmetleri AS (NYSE:TKC): Turkcell is a telecommunication service provider in Turkey. Turkcell has an aggressive growth strategy, recently acquired local operators in Azerbaijan, Georgia, Kazakhstan, Moldova, Ukraine and Belarus. Dividends increased from $0.32 in 2006 to $0.59 in 2010. Also, its assets more than doubled along with revenues during the same time period.

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

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