Retirees and other income seekers have been put through a nasty squeeze over the past two years. As recently as December 2007, financial stocks (banks, insurers, REITs, etc.) issued nearly 30% of the dividends paid by companies in the Standard & Poor’s 500 index.
Today, thanks to massive dividend cuts, the financial sector contributes only 9% of the pie. Telecom providers, though, have continued to pump out healthy dividends right through the economic slump.
If you really want to shoot for big gains, you should consider my favorite emerging-markets telecom, China Mobile(CHL). The largest wireless carrier in the world, CHL boasts 488 million subscribers — 60% more than the entire population of the United States!
As enormous as CHL is already, it has plenty of room to grow. In China, only about one potential customer in two has a mobile phone. By contrast, wireless market penetration in the United States is nearing 90%.
Best of all, for a safety nut like me, CHL has prudently managed its growth with a minimum of debt. At current exchange rates, the company’s long-term debt amounts to about $5 billion, versus an equity market value of $190 billion.
Did I mention that the stock is cheap? At a mere 12X estimated 2009 profits, CHL is no more expensive than Verizon (VZ), which is growing far more slowly (and carries a lot more debt). The Chinese company also pays a decent dividend at 3.5%, normally twice a year.
Not only is the stock cheap, but the home currency of China Mobile, the yuan, is also drastically undervalued. A McDonald’s Big Mac costs $1.83 in Beijing, versus $3.54 in New York. While some of the difference is undoubtedly due to labor costs, China’s gigantic trade surplus indicates that, at some point, the yuan will have to be revalued upward by a substantial amount.
When that happens, I predict, domestically focused Chinese stocks like CHL will soar in dollar terms — perhaps 30% to 50% in a matter of months.
If you’re concerned, as I am, about the long-term debasement of the dollar by our Federal Reserve, you need exposure to China. Go straight to the source with CHL.
The Best Stocks to Buy Now Are the Ugliest Ones
The following five stocks have been left for dead. In the dark days of January, they were ridiculed by the press. Now, cooler heads see value. And now you need to get invested — quick. You don’t have to wait, and you don’t have to chase stocks that are already up 90% or more. You need to buy these five ugly stocks.
