Five Emerging Market ADRs Offering Big Dividends
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Dividends accounted for over 30% of total S&P 500 return during the past decade

“Successful investing is about owning businesses and reaping the huge rewards provided by the dividends and earnings growth of our nation’s – and, for that matter, the world’s – corporations.” – John Bogle, CEO of the Vanguard Group

Often neglected due to the brighter spotlight that falls on price, dividend yield is an equally important component of a portfolio’s total return. In the U.S., the benchmark S&P 500 index (SPY) (IVV) (VOO) delivered a 4.67% annualized CAGR price return over the past decade (Jan 2007- Dec 2016). Include dividends and this figure rises up to a 6.93% annualized CAGR return; a differential of 2.26% accounted just by dividend payments received from stock holdings. Data suggests that historically, 52.3% of all returns generated by investors in the US benchmark index have been accounted for by dividends.

The attractiveness of dividend growth investing rests on the following factors:

  1. Dividends earned are tangible and permanent benefits while price gains are always at the risk of a market reversal. In the words of Richard Russell, “A stock dividend is something tangible — it’s not an earnings projection; it’s something solid, in hand. A stock dividend is a true return on the investment. Everything else is hope and speculation.”
  2. Dividend-paying stocks tend to outperform non-dividend-paying stocks over a period of time.
  3. Dividend stocks have a greater retirement appeal due to a) consistent returns, and b) lower exhibited volatility over time.

5 emerging market ADRs offering big dividends

For investors in emerging markets, looking for stocks that offer big dividends may not be such an easy task. Well! We’ve done the job for you. We found the top 5 emerging market stocks trading on US-exchanges (via ADRs) that offer big dividends. Here’s the list:

ADR TickerCompany NameCountryDividend Yield (%)YTD Price Return (as of March 7, 2017)1-Yr Price Return (as of March 7, 2017)
HNPHuaneng Power International, Inc.China9.32%6.5%-19.8%
XINXinyuan Real Estate Co., Ltd.China8.18%-4.8%19.5%
AVALGrupo Aval Acciones Y Valores S.A.Colombia4.8%4.8%3.14%
SPILSiliconware Precision Industries Co., Ltd.Taiwan4.51%6.7%2.1%
PHIPLDT Inc.Philippines3.88%4.2%-24.3%

 

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HNP

Huaneng Power International, Inc. is an independent power producer based in China. With a dividend yield of 9.3%, the Huaneng Power International, Inc. (HNP) ADR leads emerging market ADRs in terms of offering big dividends. The ADR has an annualized payout of $2.58 and a payout ratio of 63.2%. Dividends paid by the company have demonstrated a rising trend over the years. From a $1.5 paid in 2007, the company’s dividend rose to $2.9 in 2016.

Huaneng Power is currently trading at a favorable trailing twelve months PE ratio of 7.42, compared to its industry’s average PE of 15.55, and the S&P 500’s 20.12.

XIN

Xinyuan Real Estate Co., Ltd. (Xinyuan) is a real estate developer and property manager primarily in China and in other countries. With a dividend yield of 8.26%, the Xinyuan Real Estate Co., Ltd. (XIN) ADR is the second biggest dividend-paying emerging market ADR. The ADR has an annualized payout of $0.39. Dividends paid by the company have demonstrated a rising trend over the years. From a $0.12 paid in 2012, the company’s dividend rose to $0.30 in 2016.

Xinyuan was one of the first Chinese real estate developers to enter the U.S. market and over the past few years has been active in real estate development in New York. The ADR has returned 19.5% over the past year.

AVAL

With a dividend yield of 4.8%, the Grupo Aval Acciones Y Valores S.A. (AVAL) ADR is the third biggest dividend-paying emerging market ADRs The ADR has an annualized payout of $0.40 and a payout ratio of 55.6%.Comparatively, its peer’s median dividend yield stands at 1.57% and the payout ratio at 15.88%.

AVAL trades an attractive forward valuation of 11.19 times earnings. The ADR has returned 3.14% over the past year.

SPIL

Siliconware Precision is a Taiwan-based integrated circuits packaging and testing company. With a dividend yield of 4.5%, the Siliconware Precision Industries Co., Ltd. (SPIL) ADR is the fourth biggest dividend-paying emerging market ADR. The ADR has an annualized payout of $0.35. Dividends paid by the company have demonstrated a rising trend over the years. From a $0.4 paid in 2007, the company’s dividend rose to $0.6 in 2016.

Renaissance Technologies has the good $11.8 million invested in Siliconware Precision Industries ADR (SPIL), followed by OZ Management, which holds a $2.4 million position in the ADR. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, John Overdeck and David Siegel’s Two Sigma Advisors and D. E. Shaw’s D E Shaw are other prominent hedge funds and institutional investors with long positions in SPIL.

PHI

PLDT, Inc., formerly Philippine Long Distance Telephone Company (PLDT), is a telecommunications service provider in the Philippines. With a dividend yield of 3.88%, the PLDT Inc. (PHI) ADR is the fifth-biggest dividend-paying emerging market ADR. The ADR has an annualized payout of $1.11 and a payout ratio of 43.5%. However, dividends paid by the company have demonstrated a falling trend over the years. From a $1.2 paid in 2012, the company’s dividend was down to $0.05 by 2016.

On March 7, Credit Suisse Group AG upgraded PHI from ‘Underperform’ to ‘Neutral’. Hedge funds and other institutional investors, which currently own about 10% of the company’s stock, have shown a lot of increasing interest in the company. Marshall Wace LLP, Comerica Bank, Two Sigma Investments LP, Dimensional Fund Advisors LP, and Renaissance Technologies LLC are among the deep-pocketed investors who have been buying into the company during 4Q16.

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