Shun Excitement for Boredom

 | Jul 30, 2012 | 5:00 PM EDT  | Comments
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Stock quotes in this article:

abv

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vod

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DEM

When it comes to investing, the more boring the topic, the better I like it. Wall Street doesn't like boring. Wall Street instead tries to handicap whether or not Facebook (FB) is now attractive to buy or sell at its $45 billion valuation. Or, now that Groupon (GRPN) is trading for a valuation of $5 billion, if Google (GOOG), which originally offered to buy Groupon for $6 billion, would be interested in it again. I don't presume to suggest that I would know any better than the thousands of folks who wake up every day trying to answer questions like this.

Instead, I shun excitement for boredom. And still today, dividends are considered boring by many. If that weren't enough, start talking about dividend stocks from overseas and you get very few listeners. But what many don't realize is that dividends are essential components of most international business. Brazilian companies are required to pay out 25% of net profits to shareholders as dividends. Companhia de Bebidas Das Americas (ABV), more commonly known as AmBev, is an interesting Brazilian name. Ambev is the fourth largest beer maker in the world. In addition to its own stable of brands, AmBev has a license agreement with Anheuser-Busch InBev (BUD), to distribute Budweiser in Brazil.

AmBev shares yield 3.6% today. More so, the company's own by laws mandate that the company pay out 35% of its net income. In the coming years, profits are likely to continue growing due to the resiliency of alcohol sales and the growth of Brazil's economy. With the upcoming 2014 World Cup Soccer Tournament in Brazil, the next few years should be very attractive for AmBev.

U.K.-based Vodafone (VOD) has been a dividend standout for years yet continues to be underappreciated unless you own the stock. While U.S. based AT&T (T) and Verizon (VZ) both sport attractive yields nearing 5%, with Vodafone you are getting a yield over 6% plus all the exposure to growth from areas like Africa and India. Vodafone, as 45% owner of Verizon Wireless, will also be getting a $4.5 billion dividend from Verizon Wireless later this year.

I'm usually not one to dish out ETF names, but I know some are more comfortable with a basket of stocks. Two suggestions would be the WisdomTree Emerging Market Equity Income (DEM) or the iShares Emerging Markets Dividend (DVYE). WisdomTree has a yield of 4% and trades for $52 against an NAV of $56 while DVYE yields close to 7%.

In the current environment, if you ignore quality stocks with strong dividends, you do so at your own peril. Interest rates will remain low for quite some time and inflation – yes, today's inflation -- is giving a negative real rate of return. U.S. Treasuries will be no different for the next several years. Dividends are real and, when matched with a quality business, the risk/reward profile is very favorable.

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