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The Foreign Bank Boosting Dividends +232% |
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By Carla Pasternak |
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When it comes to developing economies, one of the best places to
look for income is their banks. I've uncovered one bank in
particular that has a history of raising payments dramatically
thanks to growth fueled by a seldom-mentioned economic hotspot.
(Full Story Below) |
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The
Foreign Bank Boosting Dividends +232%
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I have a little quiz for you.
I'll describe a few features of one of the most intriguing
places in the world to invest, and you tell me which nation
I'm talking about. Ready?
With impressive stats like these, I'd venture
you think I'm talking about one of the popular "BRIC"
nations (Brazil, Russia, India, China). Guess again...
The answer is Chile.
Chile doesn't get as much press as some of the larger
growing nations, but it should be on your radar --
especially when it looks like the U.S. markets could be in
for a rocky ride. And here's a little trick on finding
income in developing nations like Chile: the first spot to
look is the banks.
Banks are at the heart of any developing economy. Growing
businesses need loans to expand operations to meet more
demand. Meanwhile, a growing base of consumers crave loans
to purchase homes, buy cars, or make other larger purchases.
This speaks nothing of other aspects of banking such as
credit cards or investment accounts.
This, of course, leads to rapid growth for banks in
developing economies... and they're typically generous in
paying their earnings to investors as dividends.
Santiago-based Corpbanca SA (NYSE: BCA) bank is a
perfect example. (Note the ticker; these shares trade on
the NYSE.)
Chile's largest bank, Corpbanca offers commercial and retail
banking through more than 100 offices. The bank also offers
mutual fund management, insurance, and securities brokerages
through a network of subsidiaries.
The performance of this stock has been outstanding. BCA
returned investors +120% in 2009 and has posted a remarkable
average annual three-year total return of +26% compared to
-9% for the S&P 500. Just this year it has returned +40% so
far.
Those heady returns are what you'll get when investors find
strong growth in this type of investing climate. Net income
at Corpbanca has more than doubled over the past three
years, from $73 million in 2006 to $152 million in 2009.
Meanwhile, dividends (paid each March) have rocketed from
$1.09 per share in 2006 to $3.62 this year -- a +232%
increase.
There are a few items to watch with this bank. First, it's
paid out roughly 100% of net income over the past few years,
so don't expect the phenomenal income growth to last
forever. Second, you'll want to hold the shares in a taxable
account. The Chilean government withholds 35% of payments to
foreign investors, but you can get this amount back at tax
time, if held in a taxable account.
I'll be watching BCA shares. I think it's a strong income
and growth play. But before I consider buying, I'm
waiting for the shares to pull back. Since the end of May
alone they've gained more than $10 per share and now trade
at a record-high.
It seems we're not the only ones wanting a piece of this
great income story.
Good Investing!
Carla Pasternak's Dividend Opportunities
Interested in learning more about the hundreds of
high-income opportunities awaiting you outside the U.S.?
Then I invite you to try a risk-free subscription to my
High-Yield International newsletter.
Follow this link for all the details... including
where you can find some of the highest yields in the world.
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Notes
Billions of dollars have been pouring into
bond funds as investors search for a safe place to park their
cash. But what if interest rates rise?
While it could be a bit before we see higher rates, one way to
protect yourself is to invest in funds with relatively short
durations (5 years or less).
Duration is a measure of how sensitive bonds
are to interest rate changes. Those with shorter durations
shouldn't be as affected if interest rates increase.
-- Research Staff
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This country produces more copper than any other
nation in the world. It produces about five
times as much as the United States (who is the
second-largest producer).
