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It's no secret that emerging economies like China and Brazil
have grown at a solid clip over the past year while most of
the rest of the world has been marred in recession.
But did you know that one member of the developed world also
bucked the trend by dodging the recession and growing its
economy in the last year?
Believe it or not, this country saw exports rise in 2009. And while the United States and Europe are struggling
to recover, this country is currently experiencing falling
unemployment rates, rising housing prices, and rising
business investment.
In fact, this country has enjoyed nearly two decades of
uninterrupted growth and is among the world's top-performing
markets over the past century... and it's home to some
delicious yields.
The nation: Australia
Returns Down Under
 While
known for barbecue and beer, Australia also has a long
history as one of the best equity markets on the planet.
According to Dutch bank ABN AMRO's Global Investment Returns
Yearbook 2007, Australia's equity markets have returned an
average of +7.8% a year for over a century, from 1900
through 2007 (108 years!). These returns are among the best in the world
over that time frame, dwarfing a +6.6% return for the United
States and a +5.8% average for the world's 17
most-industrialized nations.
That's great, but what has Australia done lately?
Australia's benchmark ASX 200 Index returned +37.0% in 2009,
outpacing the S&P 500's +26.5%. But the kicker is that the
Aussie dollar has been one of the world's strongest
currencies, and its appreciation against the greenback has
more than doubled those equity returns to +74.6% for U.S.
investors.
You see, thanks to China, Australia was the only developed
market country not to see falling exports in 2009 and the
only developed market economy to skirt the recession and grow
GDP over the year. Australia is a country rich in natural
resources, which stoke the fires of the world's
fastest-growing economies. Fueled by China's appetite for
Australia's abundant natural resources like coal, iron ore,
and natural gas, exports to that nation increased +30% for
2009. And a strong economy has led to a strong currency.
A High-Yield Paradise
But
Australia is also a domestic growth story. The country's
consumer-driven businesses may not be the first investment
ideas that pop into your head when you think of Australian
equities, but they are prime beneficiaries of the country's
healthy economy. And some of these stocks offer a rich
income stream that will benefit as the Australian dollar
keeps strengthening.
The benchmark Australian index yields 3.9%, compared to the
S&P 500's 2.1%. And these yields come from everywhere: banks
(which sidestepped the problems seen in the U.S.), telecoms,
gambling companies... you name it. I've included a list of
some of my favorites below.
 There
are a couple of things to keep in mind. Dividends on
Australian stocks trading in the United States are declared
in Aussie dollars and converted to U.S. dollars at the then
current exchange rate on the payment date. Over the past
year, the Aussie dollar has gained +26% in value against the
greenback. U.S. investors received an equivalent pay raise.
As well, dividends qualify for the reduced dividend tax rate
of up to 15% for U.S. investors. A foreign withholding tax
of 15% is withdrawn from the dividend before it enters your
account but can be reclaimed by filing IRS Form 1116, if the
stock is held outside an IRA type of account.
Momentum is Strong
With Australia skirting the global recession, its momentum
seems unending for now. Australia's central bank sees growth
of +3.25% in 2010. Australia's jobless rate now sits at
5.7%, down from 5.8% last month. That's almost half the 10%
jobless rate in the United States and 9.8% in the European
Union. The country is also enjoying rising retail sales,
higher housing prices, and increased business investment --
and all these factors are a favorable backdrop for its
equity markets.
In short, if you're looking to for high yields and strong
economic growth, Australia might be just the ticket.
Good Investing!
Carla Pasternak's Dividend Opportunities
P.S. -- I profiled the Australian market in my most
recent issue of
High-Yield International. In addition
to the fully disclosed table above, I provided readers with
in-depth profiles of my two favorite Aussie plays. To learn
more about
High-Yield International and gain access
to my Australian feature,
keep reading...
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