I know your dilemma. You want to put at least some of your portfolio’s risk capital in hot Chinese stocks, and for diversity purposes you also want to add a little juice to your winnings from regions other than U.S. However, you’re primary investment objective still is income, so whatever Chinese stocks you pick had better offer up a decent dividend yield.
Well, today you’re in luck, because you can have it both ways. You can participate in the capital appreciation served up by Chinese stocks, and if you pick the right ones, you also can capture dividend stocks with yields that beat most of the Dow Jones Industrial Average.
In case you think that this pursuit isn’t worth your while, I’ll point you to a couple of numbers to disabuse you of that notion. Consider that over the past three months, the iShares China Large-Cap ETF (FXI) — which tracks the benchmark China 25 Index — has delivered gains of 11.7%. That metric dwarfs the relatively puny gains of the S&P 500 as measured by the SPDR S&P 500 Trust (SPY), which has delivered gains of just 2.1%.
Yes, the SPY offers a slightly higher yield of 1.78% vs. the 1.69% yield you get with FXI, but given the relative outperformance that’s no reason to argue in favor of large-cap U.S. stocks.
Fortunately, there are far better Chinese dividend stocks out there for you to choose from, ones that are spanking the S&P 500, and also offer up enticing yields sure to make any dividend hound smile.
Here are three hot Chinese dividend stocks that also pay big dividends.
Chinese Dividend Stocks #1 — China Mobile Ltd. (CHL)
3-Month. Gain: 31.6%
Dividend Yield: 3.1%
When you’re China Mobile Ltd. (CHL), the largest wireless telecom provider on the planet, you can bet you’re also a money-making machine and a dividend-paying stalwart. Although recent quarterly numbers didn’t wow Wall Street, the company’s new strategy to reduce the subsidies it provides to customers who buy new handsets was pretty impressive.
Rather than reduce the cost of a smartphone, China Mobile is going to cut monthly subscription fees, a move that made analysts happy, as well as traders. CHL shares now trade at multi-year highs, and over the past three months the stock has spiked more than 30%.
CHL also offers a dividend yield of 3.1%.
Chinese Dividend Stocks #2 — Sinopec (SNP)
3-Month Gain: 12.3%
Dividend Yield: 3.7%
Sinopec (SNP) is the country’s mega-producer of oil, natural gas, and specialty chemicals. The company recently released its financial results for the first half of the year, which showed a 7.5% year-over-year gain in net income to 32.54 billion yuan, or approximately $5.3 billion. Sinopec benefitted from rising crude oil prices and from increased natural gas production in the first half of 2014, as well as an increase in refined crude products sales.
Over the past three months, SNP shares have seen a strong share price surge of more than 12% as investors continue to pour money in mega-cap Chinese stalwarts. For fans of dividend stocks, SNP also keeps pumping out that yield, offering investors a 3.7% yield along with sizable share price appreciation.
Chinese Dividend Stocks #3 — Huaneng Power International (HNP)
3-Month Gain: 12.7%
Dividend Yield: 5.1%
Utility companies are traditionally strong dividend performers, and that’s certainly been true of Chinese power giant Huaneng Power International (HNP). The energy infrastructure behemoth is primarily an electric power producer, selling electricity to China’s regional power grids.
The company generates that electric power in a variety of ways, including the burning of traditional fossil fuels such as coal and natural gas. However, a good portion of the power it makes comes from cleaner sources such as wind and hydro-electric sources. As more and more Chinese enter the middle class, more and more electric power customers will come online, and that means a strong stream of revenue and earnings coming into HNP.
HNP shares have surged some 12% in the past few months, which is reason enough for momentum players to check it out. However, the real appeal of HNP is the 5% dividend yield you get when owning this giant Chinese powerhouse.
As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.