Tap in to China!
14 Chinese Dividend Stocks In 1995, the NASDAQ was trading around 1000. On 3/10/2000, it hit a peak of 5048. Such euphoria had not been seen since the railroad boom of the 1840s or the automobile boom of the 1920s. Now it is Chinaís turn. Last quarter China grew at a brisk 8.9% rate thanks to the governmentís aggressive stimulus. The following are 14 Chinese stocks that trade on U.S. exchanges and have dividends over 2%: 14 Chinese Dividend Stocks Name (Symbol) Sector Mkt Cap Yield P/E Forward P/E CHINA MOBILE (CHL) Telecom 192.55B 3.5% 12 n/a CHINA PETRO&CHEM (SNP) Energy 76.60B 2.3% 10 8 CNOOC LTD ADS (CEO) Energy 72.39B 2.8% 17 10 GUANGSHEN RAIL (GSH) Railroad 3.07B 2.2% 18 n/a PETROCHINA CO ADS (PTR) Energy 237.01B 2.5% 16 11 YAZHOU COAL MNG (YZC) Energy 9.01B 2.9% 13 n/a China Medical Tech (CMED) HealthCare 480.32M 3.6% n/a 9 CHINA NEPSTAR ADS (NPD) HealthCare 772.72M 4.7% 39 34 CHINA TELECOM CP (CHA) Telecom 37.05B 2.1% n/a 20 GIANT INTERACTIV (GA) Online Game 1.62B 2.5% 13 12 GUSHAN ENV EGY ADS (GU) Basic Mat 117.73M 9.4% n/a 140 HUANENG POWER (HNP) Utilities 7.93B 2.1% n/a 11 NOAH EDUCATION (NED) Education 233.17M 9.7% 15 n/a WSP HOLDINGS LTD (WH) Basic Mat 411.58M 7.3% 5 n/a I discussed the 1st 6 stocks (CHL, SNP, CEO, GSH, PTR and YZC) in my Oct 13ís article. The 8 new stocks are mainly in healthcare, telecom, and the utilities sectors. Health Care New medical product development is both costly and labor-intensive and has a very low rate of successful commercialization. Companies that have to spend heavily on R&D have an inherent flaw in their competitive advantage that will always put their long-term economics at risk. As a small cap, CMEDís operating results have fluctuated in the past and may continue to fluctuate significantly from time to time. I have followed this stock since summer 2007, when it appeared on the top 100 list of Investorís Business Daily. The following is a comparison between CMED, Johnson & Johnson (JNJ), and Alcon (ACL), the biggest medical instruments supplier by market cap: Metrics CMED JNJ ACL Trailing P/E n/a 13.4 22.1 Forward P/E 8.9 12.5 19.6 Operating Margin 17% 27% 37% Debt/Operating Cash Flow 5.8 0.8 0.3 Yield 3.6% 3.2% 2.4% As a result of acquisitions of the ECLIA, FISH, and SPR technologies, as well as BBE business, 59% of CMEDís total assets are intangible assets and goodwill. Earnings could be adversely affected if the company chooses to recognize impairment losses. Nonetheless, with plenty of cash on hand, CMED might be benefit from the lucrative and profitable health care market in China. NPD has 2700 drugstores providing pharmacy services. Its P/E is too high. Telecom Competition is intensifying for China's major telecom operators as the government granted 3 third-generation mobile licenses. CHL experienced a slowdown in profit growth recently, while rival CHAís net profit fell due to higher marketing costs to attract customers to its newly acquired cellular business. Electric Utilities China has increased its appetite for coal power. Barronís projects that coal usage will increase 55% in the next 15 years. Variable coal spot prices, possible tariff adjustments, along with rising power production nationwide make HNPís future uncertain. The following is HNPís dividend history and comparison with top 2 U.S. electric utilities: Southern Company (SO) and Dominion Resources (D): Metrics HNP SO D Trailing P/E n/a 15.7 12.9 Forward P/E 11.0 12.9 11.1 Operating Margin -2% 22% 25% Debt/Operating Cash Flow 7.6 6.3 4.3 Yield 3.6% 5.5% 4.8% Hong Kong & Taiwan Dividend Stocks Name (Symbol) Sector Mkt Cap Yield P/E Forward P/E CHUNGHWA TEL (CHT) Telecom 19.15B 11.0% 12 14 CHINA UNICOM (CHU) Wireless 32.87B 2.1% 23 26 City Telecom (CTEL) Telecom 271.80M 5.6% 14 n/a Himax Technologies (HIMX) Semi 224.76M 11.7% 9 9 TAIWAN SEMICOND (TSM) Semi 54.86B 3.5% 26 15 CHT is Taiwan's principal telecom service provider. Recently it announced a $1 million investment in mainland China. CHUís new iPhone launch wasn't catching on with consumers as expected. TSM just reported big sequential gains in revenue and earnings. These latest results might be the beginning of a broader rally. ETFs Fund Name P/E Net Assets Yield MSCI Emerging Markets Index (EEM) 21.6 36.7B 1.5% FTSE/Xinhua China 25 Fund (FXI) 24.7 9.7B 1.2% MSCI Taiwan Index (EWT) 28.3 3.4B 5.1% MSCI Hong Kong Index (EWH) 26.6 1.9B 3.4% iShares.comís data shows all 4 of these ETFs trailing P/Eís are over 20. Both EWT and EWH offer higher dividends than FXI and EEM: Conclusion China's export markets are tapped out. Its domestic consumption hasn't started to rise significantly. Yet the Shanghai stock market is trading at 30 times trailing P/E and 20 times forward earnings. According to Lawrence McDonald, author of A Colossal Failure of Common Sense, you canít model human behavior with computer. When a high rolling market goes wrong, history tells us it happens with lightning speed, as everyone stampedes for the door at the same time. However, for long term income investors, the key is to find fundamentally sound blue- chips with low P/Eís and consistently paying solid dividends. In addition to ADRs, foreign investors can invest in the Shanghai Stock Exchangeís B-shares or H-shares from the Hong Kong Exchange. They usually are traded at a discount to their A-share listings. Disclosure: I have long position on CHL and EEM. Data are from SEC Filings, iShares, Google and Yahoo Finance as of November 13, 2009. To learn more about how you can invest in foreign stocks such as these, be sure to check out our investing and stock trading courses!