Telkom Indonesia (TLK), or Telekomunikasi Indonesia, is a complicated machine with all the parts, I think, moving together in the right direction. Let me explain.
First, there’s the growth in Indonesia’s economy, which is forecast to show a 5.2% increase in GDP in 2010 after 4.3% growth in 2009.
Second, there’s the gradual improvement in Indonesia’s credit rating: On February 8 Fitch Rating upgraded Indonesia’s sovereign debt to BB+ from BB. That’s no small deal for a telecommunications company that has to frequently access the capital markets. (Although the debt to equity ratio looked to finish 2009 at just 33%.)
Third, there’s the company dominance of the legacy land line business and the company’s 45% share of the wireless market. That assures that Telkom Indonesia has the scale to beat back attacks from smaller competitors (the company is the aggressor in the most recent round of wireless price cuts) and that its growth will at least track growth in the Indonesia economy.
 Fourth, the company’s management is clearly focused on the bottom line. Telkom’s efforts to reduce the age (about 40% of the company’s employees are 40 or more) and size of its workforce has resulted in a reduction of more than 12,568 employees since 2002. Personnel expenses account for 24% of costs, the highest in the industry, so this effort attacks the right problem at the right time.
Fifth, the company’s current strategy focuses on increasing revenue and earnings from Internet-related telecommunications services. These new services accounted for just 9% of revenue in 2009, but they carry a much higher profit margin than the company’s landline and wireless businesses.
 Over the last two years dividends have been delivered in twice-yearly distribution with the next due, I estimate, this spring. The dividend yield right now is 3.5%.
With this post I’m adding this stock to my Dividend Income portfolio. For why you want to add an emerging market stock to as dividend portfolio see my post https://jubakpicks.com/2010/02/12/when-elephants-fly-dividends-from-emerging-market-stocks/
Full disclosure: I own shares of Telkom Indonesia in my personal portfolio. I will be adding to that position three days after this is posted.
Yahoo finance shows the trailing dividend yield to be 3.8% – but the forward yield shows only 0.6%.
Jim – does this still belong in the dividend portfolio?
Jim, Morningstar and yahoo finance say the projected yield on TLK is only 0.30% so please tell us where you got the 3.5%.
Cowboy, I am retired also. However, reaching for 8% dividend (except MLP’s) is just asking for trouble. This just signals a company or industry in trouble.
Sorry Jim. First, I don’t consider 3.5% a “nice dividend”. I’m retired and I need about 5%+.
Second, I looked into several foriegn companies that paiy a good dividends (lots of foriegn companys pay upward of 8%) but they aren’t consistant. Looking back over the last 10 years, I found they skip payments from time to time. Some pay only once per year or they pay well but they just started in 07.
I liked MTA, NZT and YPF but I finally decided on NRGY because they appear to be going places and their div has steadily increased since 01. They are here and I can read about them everyday. I just felt more secure.
Jim, you’ve mentioned that you own Matthews China Fund. Matthews also offers a fund with a nice dividend, MAPIX, for broad exposure to that region. It’s a relatively new fund, but might be an option for those that want emerging market exposure with dividends. I own it since it’s less volatile and more diverse than the pure China fund, and I wanted some dividends along the way.
Jim,
Not clear on the timing. TA shows bearish indicators and with China tightening may be traveling lower.
Jim,
Thanks for giving us some choices of emerging mrkt stocks with good dividends. You seem to be addressing more stocks from outside the US recently, possibly due to a cloudy forecast for the US economy going forward. Also glad u had an addition to the dividend income portfolio. Based upon your recent article, Dividend plays in emerging markets, would CPL, a Brazilian utility also fit here too. Thanks again.