There has scarcely been a more important time for investors to
hunt for high yields than right now.
The key reason? Safety.
But it doesn't have to stop there. I'm about to show you how you
can lock in safe, double-digit yields, during times of economic
uncertainty. All it takes is a couple of simple screening tools,
the brains to understand that cyclical swings are an opportunity --
not a reason for panic, and the guts to follow through with
As I'll explain in a moment, readers of my
advisory were able to do this very thing in 2009. And if they could
do it back then -- during one of the most uncertain economic times
in the past century -- then it can easily be done again.
First, let's take a look at where we stand...
Investors face myriad macroeconomic concerns in 2012. Since the
beginning of the year, U.S. economic data have weakened markedly --
job creation has been uninspiring at best, and consumers have been
hesitant to spend. Meanwhile, many economists are worried about the
so-called 2013 "fiscal cliff," a host of tax hikes and
government-spending reductions due to go into effect on Jan. 1,
2013. If all of these measures are enacted, it could represent as
much as a 4% headwind to U.S. economic growth early in the new
Europe is likely already in a recession , and additional
fiscal austerity measures due to go into effect this year in
hard-hit economies such as Italy and Spainoffer little chance for a
Even the news out ofemerging markets has been less than stellar,
with the Chineseeconomy slowing faster than most expected this
year. The Chinese government has even enacted several monetary and
fiscal stimulus measures to support growth.
Yet readers of
know some of the most dynamic opportunities for investors to get
high-yielding dividends are overseas.
The best-performing stocks have been defensive, like those in
the "sin" and utility groups. The worst-performing groups are those
considered economically cyclical -- financials, industrials,
transports and consumer stocks.
But investors have a habit of overreacting to short-term events.
And that creates greatprofit opportunities for smart
Last summer, for example, the global economy slowed temporarily
and cyclical stocks were slammed during the summer months as many
predicted a new global economic downturn. As the global economy
reaccelerated in the fall, those same cyclical stocks rallied
The lesson:market declines offer a good opportunity to look for
high-quality stocks that have been beaten down due to short-term
macroeconomic concerns. Patient investors can periodically snap up
these attractively-valued stocks during market downturns, locking
in high yields on their investment in the process.
One of the best measures of valuation is the
price-to-earnings-to-growth (PEG ) ratio, calculated by dividing a
company's price-to-earnings (P/E ) ratio by its long-term
projectedearnings growth rate. While there is no hard-and-fast
rule, stocks trading with a PEG of around 1.0 or lower are
considered bargains. Similarly, those with a PEG of less than 2.0
are considered reasonably valued.
For dividend-paying stocks, I also like to look at the
price-to-earnings to growth anddividend yield (PEGY) ratio. This
measure is calculated by dividing a company's P/E by the sum of its
projected earnings growth and dividend yield. Because long-term
returns from dividend-paying stocks are driven by both earnings
growth and theyield , the PEGY gives income stocks credit
foroffering investors a higher yield.
With these points in mind, I screened our vast database of
international companies, searching for stocks trading on the U.S.
and Canadian exchanges with a yield of at least 4%. I further
screened out all companies with a PEG ratio above 2.0 and a PEGY
ratio of more than 1.5. And because I'm looking for stocks that
have been beaten down amid this year's economic growth scare, I
confined my search to firms that are trading lower so far in
Action to Take -->
Any of the stocks in this table are worth further consideration,
Navios Maritime Partners (NYSE:
is an excellent example of what I'm talking about.
I bought the dry-bulk shipper in December 2009, during the
height of global economic panic. The stock price had been cut
dramatically, but investors had unfairly penalized the stock
because of the high-profile financial troubles of other dry-bulk
carriers with exposure to weakness inspot dry-bulk tanker rates.
Navios' dry-bulk carriers are all booked under long-term contracts
thatguarantee fixed leasing rates. It has little or no near-term
exposure to spot charter rates. So because the stock had been
unfairly punished I added it to my
portfolio and I'm now sitting on a total return (including
dividends) of 36%. I still think Navios is undervalued. That's why
it remains a "Top Pick" in
The point is, if you're smart and don't let the cyclical nature
of the market fool you, you can snap up incredibly high yields from
quality international stocks for an amazing price.
-- Paul Tracy
P.S. -- If you're tired of settling for paltry yields on U.S.
Treasuries, you don't have to settle for the limited world of U.S.
stocks to get the income you need. I've put together a special
report that explains how you can find some of the highest -- and
safest -- yields in the world. Go here to learn more.
Paul Tracy does not personally hold positions in any securities
mentioned in this article. StreetAuthority LLC does not hold
positions in any securities mentioned in this article.
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