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Foreign Stocks are Skyrocketing -- Here's How to Capture Your Piece of the Action, and Lock in Yields of 23.0%

Sr Financial Analyst — Fri, 02 May 2008 13:47:00 GMT

	By Nick Lanyi Editor, High-Yield International Visit this link to learn more about Nick's premium newsletter. View our subscription options for High-Yield International here.

Published: May 1, 2008

In the 16th century, European adventurers sailed across the Atlantic to a new land, in search of better lives than they could find in the Old Country. Their settlements grew into colonies that eventually became the United States of America, now the world's largest economy by far.

For decades, American investors have had little reason to send their assets on an overseas journey. Our own stock market offered solid long-term returns with acceptable volatility. By contrast, international investments tended to fall into one of two categories: slow-growth bores (European and, recently, Japanese stocks and bonds) or boom-and-bust roller coasters (emerging-market stocks and bonds).

Times have changed.

Although the U.S. economy remains
the world's mightiest, the forces of globalization have helped create attractive investment opportunities throughout the world, including in

World's Largest Economies
Rank	Country	Annual GDP ($ in trillions)
1	United States	$13.2
2	Japan	$4.4
3	Germany	$2.9
4	China	$2.6
5	United Kingdom	$2.4
6	France	$2.2
7	Italy	$1.9
8	Canada	$1.3
9	Spain	$1.2
10	Brazil	$1.1
Source: World Bank

places previously considered only by the most adventurous financial explorers. The end of the Cold War, the near-universal acceptance of capitalism and the ubiquity of online and wireless communication have resulted in falling trade barriers, rising liquidity and truly global markets.

In the 21st century, limiting one's portfolio to U.S. stocks is akin to keeping one's television tuned to one channel -- you'll find some enticing offerings, but you'll miss out on so much more.

That's especially true for high-yield investors. After all, you and I happen to live in one of the stingiest countries in the world when it comes to interest and dividends.

CDs pay less than 4%, before inflation. T-bills barely pay 1%. And the average U.S. stock pays just 2.1%. (We now have the lowest-yielding stock market in the world, apart from Japan's.)

It's a cash-flow desert here in America for anyone who needs to bank a comfortable income off their portfolio. So if you want to truly maximize the income-generating power of your portfolio, then you need to invest overseas.

Foreign Markets Deliver Average Yields of up to 8.3%

The average stock in the U.S. sports a dividend yield of just 2.1%. But in almost every other country around the world, stocks offer significantly higher yields. This phenomenon has occurred for three main reasons . . .

1.) Until 2003 the U.S. government taxed dividends as ordinary income, creating an incentive for companies to deploy excess cash in other ways. Although qualified dividends are now taxed at a lower 15% rate, corporate America has not yet fully adjusted its cash-deployment strategy.

2.) Many industries in foreign countries are dominated by state-sanctioned monopolies. These old-school companies, with strong ties to the government, tend to be the most stable -- and some of the highest-yielding -- on the planet.

3.) The largest companies in emerging markets need to offer higher-than-average yields to attract foreign investors. These high dividend payments serve to entice investors from developed countries, including deep-pocketed institutional investors.

Check out my chart and you'll see how much more other markets yield. And I'm not even including a dozen other smaller markets that are also paying more than the U.S.

Poland, for example, yields 3.9%. Singapore yields 4.1% . . . Greece, 3.0% . . . Holland, 3.8% . . . and Taiwan, 3.8%. And remember, those are just the averages -- many individual stocks

in these foreign markets are now dishing out yields of 10%, 15% . . . even 20% or more.

So if you want to capture some of the highest yields on the market, and profit from today's fastest-growing economies, then you need to be looking overseas.

Stronger Growth Outside the U.S.

The U.S. economy has continued to slow in 2008, and all signs point to a possible recession in the coming months. In fact, we might already be in the midst of one.

Between the mortgage mess and the credit crisis . . . record oil prices and nagging inflation . . . the budget deficit and the trade gap . . . it all adds up to a pretty strong headwind for U.S. investors. Fed Chairman Bernanke has said so himself.

As the world's largest economy, it is virtually impossible for the U.S. to deliver the robust growth rates that it has posted in decades past. This could lead to continued losses for U.S. stocks (or sluggish, below-average returns, at best).

Fortunately, many other countries around the world are at far earlier stages on the economic development path and should deliver much higher growth rates than the U.S. for years to come. As you can see from my chart, the U.S. economy simply can't match the growth that's taking place in foreign markets.

This year may mark a "perfect storm" of negativity for the U.S. economy. But as you can see, much of the rest of the world is expected to enjoy strong economic growth. Yes, other countries are also affected by the negative trends that are hurting the U.S. -- but foreign economies are still expanding at much faster rates.

This is remarkable because the U.S. is by

far the world's largest economy. It has long been understood that our own levels of economic activity drive supply-and-demand calculations around the world. But the link between America's economic strength and that of the rest of the world has weakened.

It used to be said that when

America sneezes, the world catches a cold. Now, it's more like a sniffle.

The reason is globalization and the wealth-spreading effects that flow from it. Consumers, producers, exporters and financiers who once depended on the U.S. now can turn elsewhere.

The global economy used to resemble a bicycle wheel with the U.S. in the middle, the fixed spokes radiating out representing our purchases and sales with all the other players. In the 21st century, it makes more sense to imagine an intricate spider's web; the U.S. remains central, but globalization allows strong but flexible strands to be woven constantly, in all directions.

What does this mean for investors? Simply that diversifying overseas is more important than in the past. When the U.S. slows, money will flow into international markets offering greater returns.

And there's another reason to invest overseas. The world is witnessing something unprecedented -- a sustained economic boom among so-called emerging markets. Again, globalization is driving this phenomenon. And because this trend is likely to last for many years, it represents a terrific investment opportunity.

China and India, the two largest countries by population, have been growing at double-digit annual rates for most of this century. Eager to catch up to the world's economic superpowers, both countries are investing tens of billions of dollars in infrastructure projects -- roads and bridges, power plants and water systems, wireless and Internet networks, even factories and cities.

Similar trends are in place in Brazil, Russia and many other countries, such as South Korea. These nations should continue to deliver exceptional growth as their economies catch up to the developed levels enjoyed by the U.S., Western Europe and Japan.

Foreign Markets Deliver Gains of up to +180%

Strong economic growth leads to sharply-rising equity prices. So it's not surprising that foreign stock markets are delivering tremendous returns.

While the S&P 500 had a lackluster 2007, rising just +3.5%, just look at the returns posted by other stock markets around the world . . .

2007 World Stock Market Returns
	China:	+180%
	Ukraine:	+135%
	Slovenia:	+97%
	Nigeria:	+87%
	Pakistan:	+86%
	Croatia:	+81%
	Brazil:	+72%
	Mauritius:	+70%
	India:	+65%
	Source: Bloomberg

U.S. stocks have never moved like this. Never. The highest one-year gain the S&P 500 ever reported was +45% -- and that was a lifetime ago . . . in 1954. In 2007, the S&P 500 didn't even crack the top 50, coming in 76th out of the world's 90 major stock-market indexes.

A Perfect Situation for Income Investors

Thanks to their combination of strong yields and enormous capital gains, foreign markets are the single greatest place for American investors to look for dependable high-income plays today. In fact, research shows that 91% of the world's highest-yielding stocks are now located overseas (see details here).

That's why I decided to team up with StreetAuthority, LLC -- one of the nation's leading publishers of unbiased, independent market research -- to launch my new premium newsletter . . . High-Yield International. It's the only newsletter of its kind devoted exclusively to finding high-yielding securities in today's best-performing foreign markets.

In recent issues, I've profiled some of the most attractive dividend payers on the planet, including a rock-solid Australian utility with a 20.8% yield, an international shipping company paying 14.5%, an emerging Europe fund with a 21.6% yield, and a diversified real estate fund with dividends of 23.0%, among many others.

If you'd like to learn the names of these companies -- plus receive a steady stream of foreign stocks, funds and other investing ideas with abnormally high dividend yields each and every month -- then I'd like to extend you a personal invitation to try my premium international investing newsletter . . . High-Yield International. Visit this link to learn more.

Capture 20%-Plus Yields by Investing in the "Other Side" of the Construction Business

Sr Financial Analyst — Thu, 01 May 2008 13:45:34 GMT

The building and construction boom is in full swing, and investors should sit up and take notice. Not only has this industry strengthened over the past year, but signs indicate that it's about to get even better.

     For many investors, that might sound like a ridiculous statement. After all, domestic housing starts plummeted to a 17-year low in March. Even worse, the number of new residential building permits plunged more than -40% -- a sign that the U.S. residential housing market isn't likely to turn around anytime soon.

     But I'm not talking about housing, nor am I solely referring to the U.S. market.

     Instead, I'm talking about the firms that build power plants, roads, bridges, water treatment facilities, and office buildings. Millions of investors ignore this "other side" of the construction business, which provides the critical backbone for economic growth across the globe.

     But if you're looking for sectors that have outperformed -- and should continue to deliver double-digit yields and strong capital gains -- then the "other side" of construction is where you want to be.

While the housing market has its ups and downs, infrastructure never seems to stop growing. Most large-scale projects are typically budgeted long in advance and are government financed. As you can see from our chart, U.S. public spending on infrastructure has tripled over the last few decades; powering through growth cycles and recessions alike.

That's the beauty of infrastructure -- it thrives in good times and bad.

     When economies are booming, infrastructure development and expansion is critical to accommodate the needs of growing businesses and populations. Meanwhile, slowing economies use infrastructure spending as an economic stimulus; providing much-needed jobs and sometimes literally paving the way for future growth.

     It isn't any surprise that as the U.S. economy heads for a possible recession, Congress has started to push for increased infrastructure spending. Infrastructure companies will be the beneficiaries -- and so will smart investors who get an early jump on this sector.

    And while housing prices continue to fall, the value of office space has not -- in many of the nation's largest cities, office rents continue to rise.

As the chart shows, while spending on U.S. residential construction topped out in late 2005, spending on non-residential construction continues to soar.

And the trends so evident here in the U.S. are magnified many times over in fast-growing emerging markets. A recent study by Morgan Stanley forecast that emerging markets will spend

an astounding $21.7 trillion on
infrastructure over the next decade.

Not surprisingly, Asia represents 67% of the projected expenditures. In China, for example, millions of new drivers take to the roads each year -- new car sales are on track to hit seven million vehicles in 2008. All of these drivers need a modern highway system, and that means big spending on roads.

And consider the burgeoning economies in cities like Mumbai, Shanghai and Beijing -- all that business development drives strong demand for everything from basic electricity and office space to advanced telecommunications systems.

With these points in mind, the following major infrastructure markets are likely to deliver strong growth in the coming years, both in the U.S. and abroad:

Power Construction

According to the U.S. Department of Energy, Chinese demand for electricity is set to jump more than three-fold between 2004 and 2030. And as you can see from the chart below, India isn't far behind.

The end result of all that demand: a new power plant opens in China nearly once per week. But despite this heady pace of new plant construction, parts of China are still plagued by rolling blackouts -- rapidly rising demand simply overwhelms supply.

And China and India aren't the only nations that are short of power. Even in the U.S., power consumption is still rising steadily. In recent summers, electricity demand has

soared to record levels in parts of the country; exceeding demand and causing blackouts in some cases. And the situation isn't going to get any better immediately -- the U.S. simply hasn't built enough power plants to keep pace with growing demand.

     But that's beginning to change. Utilities recently filed permits to build the first new nuclear power plants in the U.S. since the 1970's. And new coal plants are still breaking ground, despite environmental objections from some quarters.

     Bridges and Roads

     Last summer, the tragic and devastating collapse of the Interstate-35 West Bridge in Minneapolis, Minnesota made headlines all over the world. This wasn't some minor backcountry crossing -- it's estimated that more than 140,000 motorists traversed the span each and every day.

     Like most bridges in the U.S., the I-35 bridge was decades old, built and opened for traffic in 1967. Unfortunately, a horrifying 75,000 bridges nationwide have also been certified as structurally deficient -- many are as old or older than the Minneapolis I-35 bridge.

     Road safety isn't the only issue -- we've all complained about traffic at one point or another. The Texas Transportation Institute published a survey in 2003 measuring the amount of time commuters spend stuck in traffic each year across 75 of America's largest cities. The results were astounding -- they estimated that drivers in these cities wasted more than 5.7 billion gallons of gasoline per year sitting in traffic jams. With gasoline hovering at $3.50 per gallon, that represents a $20 billion annual drain on the economy.

     And that's only part of the cost. The study also showed that commuters wasted some 3.5 billion hours annually on the road. And that's not to mention the environmental effects -- the longer it takes to make a journey, the more pollution a car emits. The all-in cost to the U.S. economy: more than $70 billion annually, or about $520 per person.

     Many of the nation's major roadway systems date back to the 1950's and 1960's, when there were far fewer cars on the road. For years, this growing problem was largely neglected. However, that's starting to change, as U.S. roadway construction spending has risen sharply over the past two years.

     Water Infrastructure

     While $115 per barrel crude oil and $3.50 per gallon gasoline get a lot of press, water shortages rarely make the national news. After all, water is assumed to be safe and almost free -- most of us take clean water for granted.

     But perhaps that's naive. Over the past five years, several major cities have been forced to issue "boil water" alerts to protect consumers against contaminated water systems.

      And health and safety aren't the only issues -- consider that many water systems in major cities across the developed world date from before World War II. London's aging leaky pipes and reservoir systems are reported to waste 300 Olympic-sized swimming pools worth of water per day. In 2006, London was forced to issue water restrictions due to shortages. The local government also predicted they would face supply issues for the next decade unless they improved their water infrastructure.

     And in the United States, last year's severe drought in the Southeast reduced Atlanta's reservoirs down to an alarming 90-day supply of water. Smaller towns were in worse shape. Residents of Orme, Tennessee were without water 21 hours a day -- left high and dry until the mayor would open the valve to the community's near-empty water tank for a few brief hours.

     Outside the U.S., the problem is even more severe. Strong population growth in the Middle East and Asia is forcing governments to spend on desalination plants and reservoirs. In China, for example, the government has forecast that by 2030, the nation may have a more than 50 trillion gallon annual water shortfall -- that's more water than China currently consumes in a year.

     Office Buildings

     While demand for U.S. residential properties has notably weakened over the past two years, the same cannot be said of office buildings. According to statistics published by CB Richard Ellis, occupancy rates at domestic office properties remain at historically strong levels, hovering well above 85%.

     In downtown markets, availability has actually gotten even tighter -- the occupancy rate in these markets stands at around 90%, the highest reading since early 2001. Thus, demand is tight enough to continue prompting developers to build new office space.

     And once again, some foreign countries make the U.S. market look weak by comparison. In Tokyo, Singapore, Hong Kong and Shanghai, occupancy rates are an uncomfortably tight 95%. In Singapore, the demand for office space drove rents up by +86% last year.

     Lock in Stable Yields of 20% or More

     With all of these points in mind, companies that build the roads, water systems, utilities, and office buildings the world so desperately needs stand to benefit from a wave of spending in the coming years.

     Even better yet, these sectors also offer some of the best returns and the highest, most secure dividend yields on the planet.

     In recent months, I've profiled several of my absolute favorite infrastructure and commercial real estate stocks in the pages of my premium newsletter . . . High-Yield International. These include a global real estate fund with a 20%-plus yield, as well as an international infrastructure fund that yields 6% and has delivered total returns of +56% over the last two years.

     If you'd like to learn the name of these funds -- plus receive a steady stream of foreign stocks, funds, infrastructure plays and other investing ideas with abnormally high dividend yields each and every month -- then I'd like to extend you a personal invitation to try my premium investing newsletter . . . High Yield International.
Visit this link to learn more.

Thanks for joining me on my search for today's highest-yielding securities!

Blue-Chip Firm Appreciates +70% and Increases Dividends +76% in Three Years

Sr Financial Analyst — Wed, 30 Apr 2008 16:38:00 GMT

Recent Winners: Blue-Chip Firm Appreciates +70% and Increases Dividends +76% in Three Years
by Nathan Slaughter, StreetAuthority.com Staff Writer

As you are probably aware, the U.S. dollar has been stuck in a precipitous decline, sliding to record lows against the euro last week. While this freefall has made life tough for U.S. citizens traveling abroad, it has provided a brisk tailwind for domestic multi-national firms that take in a large chunk of their revenues overseas. Not only does a weak dollar sweeten currency translation, but also makes exported products less expensive for foreign consumers.

Carla Pasternak, editor of our premium High-Yield Investing newsletter, predicted this in January 2005 when she first recommended Caterpillar (NYSE: CAT, $82.25) -- a Dow Jones Industrials component that derives almost 60% of its sales in foreign markets. But that's not the only thing that Carla found attractive about this heavy-equipment manufacturer.

As she pointed out at the time, increased demand for mining and farm equipment were likely to become key growth drivers -- and that has indeed been the case, as metals and agriculture have been red-hot lately. And, of course, with a modest payout ratio of just 25% and a history of dividend hikes dating back to the Woodrow Wilson administration, there was ample opportunity for a rising income stream as well.

Since that time, Caterpillar has announced three +20% dividend increases, with the overall annual payout rising +76%, from $0.82 per share to the current $1.44. Meanwhile, thanks in part to soaring sales overseas, investors have pushed the shares from a split-adjusted price of $48.75 to Friday's close of $82.25 -- a healthy gain of nearly +70%.

In this month's newsletter, Carla has singled out another blue-chip firm with a comfortable payout ratio and a reliable pattern of lifting its dividend distributions year after year. The company, one of the most venerable financial institutions in the United Kingdom (that trades conveniently on the NYSE), has a stable earnings outlook, a rock-bottom P/E ratio of 7.5, and a hefty yield above 8%.

To see Carla's complete lineup of today's most attractive income-producing securities, including the firm mentioned above, we invite you to take a test-drive of our High-Yield Investing newsletter. To learn more, please visit this link.

Capture 11% Yields with Preferred Securities

Sr Financial Analyst — Tue, 29 Apr 2008 16:34:00 GMT

Capture 11% Yields with Preferred Securities

by Carla Pasternak, Editor -- High-Yield Investing (Learn More)

Wachovia Bank (NYSE: WB ) extended an intriguing offer late last year. The bank asked investors to lend it money by purchasing its preferred stock and promised a juicy 8% yield in return. The quarterly payments qualify for the reduced dividend tax rate, and they're secured by an investment-grade credit rating from both Moody's and Standard & Poor's.

Tempted? With stocks in a slump and bond yields at their lowest level in years, yield-hungry investors are scratching their heads in search of a safe place to park their money. Stock market volatility has been extremely high, but preferred stocks like Wachovia's offer income investors the best of both worlds -- a safe income stream and a relatively stable share price.

Why Now?
But Wachovia isn't the only financial firm looking to raise some much-needed capital by issuing preferred stock. Hurt by bad mortgage bets, other cash-strapped banks are shoring up their balance sheets by offering billions of dollars in preferreds. These include names like Citigroup (NYSE: C), Merrill Lynch (NYSE: MER), Bank of America (NYSE: BAC), and Washington Mutual (NYSE: WM). Government agencies like Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) and homebuilders like Toll Brothers (NYSE: TOL) are also doing the same.

The increased supply of new preferred stock flooding the market is sending their share prices lower. And since share prices and yields move in opposite directions, the supply surge is also lifting yields to historically high levels. Preferred stocks enjoy a whopping 7.4% yield on average according to the PreferredsOnline Index, and many sport yields in the double digits.

Falling interest rates are another plus to holding preferred stock. Like bonds, preferreds tend to rise and fall with interest rates. When interest rates rise, preferreds tend to lose value against competing investments that offer high yields. But in today's low interest rate environment, with corporate bonds yielding about 5%, high-quality preferreds are the way to go.

For the risk-averse investor, preferreds can also be preferable to high-yielding stocks because payouts are more secure than common share dividends. Preferred shareholders have a claim to a company's assets ahead of common shareholders -- that's why they're called "preferred." In other words, if a company ran into trouble, it must pay preferred dividends before common-stock dividends. And unlike common dividends, preferred payouts are predictable -- they don't go up and down with a company's earnings.

The fixed payments also tend to make share prices on preferred stocks far less volatile than common shares. In fact, since being issued in December 2007, Wachovia's preferred shares (NYSE: WB-PS) have been half as volatile as the common shares.

But before you dive into any investment, it's important to check out the fine print. That rule applies even more so to preferred stocks, as there are several options available to preferred investors. . .

Important Note: In the remainder of this article, High-Yield Investing editor Carla Pasternak explains in full detail exactly what income investors should look out for before purchasing preferred stocks. She also provides a list of nine of the best preferreds on the market -- with some offering yields as high as 11.0%. Even better, Carla serves up in-depth profiles of her two favorite preferred issues. However, in order to view the remainder of this article, you'll need to subscribe to our premium income-investing newsletter -- High-Yield Investing. After you subscribe, you'll receive immediate access to this full article, as well as our monthly High-Yield Investing newsletter and a host of additional premium content. Please visit one of the following links to continue.

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This Stable Shipping Company Sports a 7.4% Yield

Sr Financial Analyst — Mon, 28 Apr 2008 16:30:47 GMT

This Stable Shipping Company Sports a 7.4% Yield

by Paul Tracy, Editor -- StreetAuthority Market Advisor (Learn More)

Before the advent of container shipping in the 1950s and 1960s, shipping goods meant loading individual irregular-shaped items onto a ship. This proved inefficient, as there was no way to move many individual items at once, and securing odd-shaped goods for an ocean voyage took a great deal of time and labor.

Nowadays, items are packed into standard 20 or 40-foot long containers that can be stacked neatly on the decks of giant ships. Standardizing containers makes it easier to handle loading, unloading, and bundling cargo from multiple shippers. Containerships can carry cargoes as varied as auto parts, consumer goods and toys all in the same shipment.

Growth in the containership industry was rapid from 2000 through 2006, averaging over +11% annualized. The main driver of that growth was increased trade globally including, of course, the shipping of consumer goods from Asian to U.S. and European markets.

Lately, growth in containership volumes to the U.S. has slowed mainly due to the weakening economy and U.S. dollar; both factors have slowed U.S. imports. Nonetheless, trade routes between Asian nations and the Middle East have picked up markedly and volumes between Asia and Europe remain strong -- these factors have offset much of the U.S. decline.

But despite the almost continuous increase in demand, shipping rates are seasonal and can be volatile at times. Fortunately, my pick today, Danaos Corp. (NYSE: DAC, $25.13), has very little exposure to this volatility because almost all of its 36 containerships are locked in 8 to 12-year fixed-rate contracts with major shipping firms. These contracts minimize the company's exposure to short-term swings in supply and demand.

And DAC also benefits from a growing trend toward vessel outsourcing. In other words, shipping firms do not want to shell out to purchase their own fleet of ships to transport goods. Instead, they prefer to lease these ships from dedicated third-party operators like DAC; this trend has allowed DAC to grow its fleet and sign up new ships under long-term lease agreements. In fact, the firm has 32 additional ships scheduled for delivery in the next three years, and the majority of them already have contracts in the works.

DAC currently sports a dividend yield of 7.4%; there is little downside risk to dividends due to DAC's long-term charter deals. And as new ships are delivered and start earning fees, there's room for DAC to continue boosting its payout.

Danaos offers a strong yield with relatively little exposure to any short-term weakness in containership traffic to the U.S. That said, the stock has been unfairly hit by fears that a U.S. economic slowdown would hurt the containership industry. This situation has given long-term investors a rare chance to capture a steadily growing company and a solid dividend yield at a rock-bottom price.