Sell Suburban Propane (SPH)
I’ve got to sell something out of the Dividend Income portfolio today to make room for my buy of Telkom Indonesia. After Suburban Propane (SPH) announced a 34 cent a share earnings miss on February 4 the choice is pretty easy.
Revenues, which fell 17% from the December quarter of 2008, also missed analyst projections. By volume propane sales fell 9%. Some of that was due to warmer than average weather but the biggest part of the decline came in the non-residential sector where the slow economy ate into volumes.
Buy Telkom Indonesia (TLK)
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.
When elephants fly–dividends from emerging market stocks
When emerging stock markets hand you lemons, make lemonade.
Specifically dividend-paying lemonade.
So far 2010 hasn’t exactly been kind to emerging market stocks. The ETF (exchange traded fund) that tracks the iShares MSCI Emerging Markets Index (EEM) was down 6.4% from the close on December 31 through the close on February 8.
Individual emerging markets did even worse. The iShares MSCI Brazil Index ETF (EWZ) was down 15.8% from December 31 to February 8. The iShares FTSE/Xinhua China 25 Index ETF (FXI) was down 12%. The iShares MSCI BRIC Index ETF BRIC) of stocks from Brazil, Russia, India, and China was down 13.4%.
So how do you make lemonade from these lemons? Especially when it’s not at all clear that these markets, which have tumbled on worries about a slowdown in China’s economic growth (for more on why I think that worry is overstated see my post http://jubakpicks.com/2010/01/28/the-rout-in-global-stocks-is-a-tempest-in-the-teapot-of-chinas-command-economy/ ) and on fears that the budget crisis in Greece would spread to the rest of the European Union, are done falling.
Money is moving out of U.S.Treasuries in anticipation of higher interest rates
The bond market is putting distance between European and U.S. government bonds. Yields on U.S. 10-year Treasury have climbed twice as fast as yields on similar German government bonds since the start of December, according to Bloomberg. The bonds had traded in sync since April 2007.
The cause?
A belief that a faster growing U.S. economy will lead the Federal Reserve to raise interest rates well before the European Central Bank does. The consensus among economists is that the U.S. economy will grow by 2.6% in 2010 while the German economy grows by 1.9%.
You can see one reason for this conclusion if you look at unemployment rates for the two economies.
Buy American Electric Power (AEP)
With this post I’m buying American Electric Power (AEP) for my Dividend Income Portfolio. I think a modestly better economy in 2010 will increase company sales, profits, and cash flow enough to increase the dividend in 2010. (The yield is now 4.7%.) That will give income investors some protection against rising interest rates in 2010. The company certainly has room to raise the dividend since the current payout ratio is only around 60%. That’s low for a utility. (The payout ratio is the percentage of a company’s profits that are paid out to shareholders in dividends.)
In 2010 I’m looking for a big pick up in the company’s sales of electricity to industrial customers in its core Mid-West service area on a pickup in U.S. manufacturing that is, tentatively I’d admit, now under way, and in the company’s sale of out of system power to other utilities.
