Investors love dividends. Dividends give you money in
return for being a shareholder. Dividends can change however,
reflecting different aspects of a companies fortune. Three
Brazilian dividend stocks my be worth a look.
Better growth rates are occurring overseas and many high
yielding stocks are there as well. Brazil has been
experiencing growing pains as its economy struggles and seeks to
become less resource dependent. The stock market in Brazil is
trading lower now than it has over the past few years. This
is providing investors with an opportunity to buy shares of
dividend paying companies at reduced prices.
Petrobras (PBR, quote ) is one of the stocks that comes
up immediately when discussing Brazilian stocks. PBR recently
discovered new and large oil and gas reserves offshore Brazil
should contribute positively to its future. Some analysts expect
the reserves to help PBR double its resource base and production
over the next ten years.
The stock is trading at more than a 20% discount from earlier
2012 highs and is less than 1/3 of its price back in 2008. It
has paid a dividend every year for more than a decade, although the
dividend has been inconsistent. The current dividend
yield is 2.5%.
Another stock that tops the list of Brazilian companies is Vale
SA (VALE, quote ). Vale is a metals and mining
company. Like PBR it is trading lower than in the past but
has a better defined up trend as seen in the chart below.
It also has a better yield than PBR, nearly 6%, and a
comparable dividend paying track record. Vale is the world's
largest iron ore producer and a major exporter to China. Its
future is inextricably linked to that of China's own steel
industry. China is producing more of its own steel and as it
does it will have a direct negative impact on Vale's bottom line.
This presents a risk to the stock price and a need for Vale
to expand relationships with other customers.
Companhia Energetica Minas Gerais (CIG, quote ) is a
Brazilian electric company. Of the three stocks profiled in
this article it has the highest yield of 12%. CIG has paid a
dividend every year for the past decade except for 2007 and the
dividend has varied in amount. Analyst ratings on the stock
currently have a bullish bias.
The chart of CIG has me a little concerned. It displays
two technical formations in combination. First, the stock
experienced a double top in the spring and summer of
2012. This should have been a bearish indicator for observers
at the time. This bearishness was fulfilled as the stock
dropped from $20.00 per share to less than $11.00 per share by
November. But the chart is also starting to look like a head
and shoulders formation. The peak in July 2011 is the first
shoulder; the double top can be considered the head; and the second
shoulder is currently forming.
If this does play out I would expect the stock to rise to
approximately $15.00 per share and then resume its decline.
This is of course only a technical observation ignores any
fundamental changes in the companies profile which could also
influence the stock price.
As major participants in their respective industries I think
each of these stocks deserve a spot on watch lists if not in
portfolios. For some, like CIG, there is some obvious short
term risk. But as long as the Brazilian economy continues to
move forward, despite intermittent setbacks, all three companies
should have prosperous long term futures.