Many investors look to the so-called BRIC nations (Brazil,
Russia, India and China) for emerging growth opportunities.
However, these investors may be overlooking one emerging
powerhouse in Southeast Asia.
Overall, as an investor, I particularly like
emerging-marketdividend stocks for 2013. Companies in the
MSCIEmerging Markets Index have increased dividend payments
steadily for the past 10 years. Unlikeearnings , dividend
payments have been far steadier, with payout ratios mostly in the
30% to 40% range.
Additionally, as many of these companies mature, the potential to
increase dividend payouts is high -- companies in emerging
markets often have lowerdebt levels than firms in developed
markets. The number of emerging stocks with high dividend yields
in the MSCI World Index has increased from 60 in 1995 to more
than 300 lastyear .
But one Southeast Asian country is especially ripe for growth.
Driven by exports, the country'sGDP is at its highest level in
decades, with growth well beyond 6% in 2012.
There are several reasons why this country is one to
Along with political stability, it has is a young workforce:
Half of the population is less than 24 years old. In addition,
English is the country's second most dominant language.
Thesefactors are why I think the Philippineswill outperform the
Southeast Asia region and enjoy strong growth this year and
beyond. The Philippines'economy is the world's 40th largest,
according to the International MonetaryFund -- but it is
projected to reach the top 20 in the next 20 to 30 years.
The Philippines has been transitioning from an agricultural
economy to one more focused on services and manufacturing. Its
political stability, youthful workforce and prevalence of English
are ideal for companies already setting up business process
outsourcing centers there. And the trend isn't slowing down.
One of my favorite plays in this country is a high-yielding
. Established in 1928, the Philippine Long Distance Telephone Co.
is the largest telecom in the Philippines and one of its largest
and most traded stocks. The company has been strong in recent
years, increasingrevenues annually. Its policy is to declare a
regular dividend of 70% ofcore earnings per share and aspecial
dividend whenever possible. It hasEBITDA margins of 46%,
aprice-to-earnings ratio of 17 and acash dividend yield of 5%.
PLDT has three operating segments: wireless, fixed line, and
Internet and communications technology.
Nearly 60% of the Philippines' population owns cellphones, and
the wireless segment is PLDT's core business. A 10% increase in
wireless subscribers brought its share of the country's
mobilemarket to 68% at the end of 2012. The company's wireless
revenues grew at an industry-leading 15% during the year.
PLDT's fixed-line division focuses on data and other network
services, as well as information and communications
infrastructure and services for Internet applications.
The company's Internet and communications technology division has
focused on business process outsourcing and communications
infrastructure; it also provides services for Internet
applications and multimedia content delivery
In its most recent quarter, the company reported adjustednet
income of $189 million, with operatingcash flow increasing to
$646 million. Gross profits increased to $3.4 billion from $3
billion in 2011, and net income was up 20%, to $862 million.
Risks to Consider:
Foreign exchange risk is at play with international stocks,
andcurrency fluctuations could impact returns. With 88% of its
debt priced in U.S. dollars,depreciation against the peso could
impair profitability because of higher interest payments. With 50
million mobile phone subscribers in the Philippines, the market
is approachingmaturity . As a result, the company's growth will
come to a screeching halt unless it stays innovative.
Action to Take -->
With a solid, growing dividend of 5%, PLDT is a good buy up to
$75. Thisstock has seen tremendous growth in the past decade, and
I think the best is yet to come. Again of more than 25% in the
next 12 months wouldn't surprise me.
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