This is a guest contribution by Como Investir no Exterior originally published on November 30th, 2020
Updated on June 24th, 2022
Since my last post here a lot has happened in the Brazilian market. In my last post, the Bovespa index was around 110,000 and approaching its all-time high. However, the index is currently trading at 100,000.
Despite the great volatility in the market, 3 stocks continue to grow and pay really great. In this article we will review these 3 stocks and their latest results.
High-Yield Brazilian Stock #1: BB Seguridade (BBSEY)
BB Seguridade is a holding company controlled by Banco do Brasil S.A. that operates in the insurance industry and is organized into two segments: distribution business and risk and accumulation business.
The distribution business sells, through BB Corretora, products such as open pension, private plans, capitalization bonds, dental assistance, and insurance. The risk and accumulation businesses, on the other hand, operate in the form of joint ventures with private partners that operate in the same distribution business segments.
Even with the high volatility in the markets, BBSEY had an excellent first quarter of 2022. Its consolidated net income was R$ 1.2 billion, an expansion of approximately 21% in relation to the same period of the previous year.
All its segments had an increased profit over the previous year. A highlight was the pension sector with BrasilPrev, which had a 20% increase compared to 2021.
As interest rates are increasing, the financial result for the first quarter of 2022 was higher than what we saw in 2021. This shows that the moment is favorable for the stock.
With these results we can predict that BBSEY will continue to pay high dividends, reaching the value of 10% per year. You can also find BB Seguridade on the OTC Market with BBSEY Ticker.
High-Yield Brazilian Stock #2: Telefônica Brasil (VIV)
Telefonica Brasil S.A. is the largest telecommunications company in Brazil offering fixed and mobile phone, fixed and mobile broadband, ultra broadband, digital data and services, IT and pay TV. Currently, VIV has more than 90 million customers, 74 million of whom come from mobile service.
The company has 3 relevant spectrum frequencies in the mobile operation covering 89% of the Brazilian population with 4G, in addition to offering 4.5G in 1407 cities. In the fixed telephony operation, they offer services in 287 cities.
VIV is controlled by the Spanish Telefónica Group, which has been in the communications business for more than 90 years worldwide. The Telefónica Group operates in 13 countries, in Spain under the Movistar brand, in Germany and England under the O2 brand and in Brazil under the Vivo brand.
Net revenue was R$11.3 billion in 1Q22. This represents an increase of 4.6% in relation to the same period of the previous year. Even with net income having fallen by around 20%, its result in 1Q22 was very strong.
In relation to 2021, we have the following percentages: Net revenue was 4.6% higher, total revenue was 7.5% higher, mobile telephony revenue was 6.1% higher and fixed telephony 11.9% higher. This result was made possible by customer loyalty, making churn much lower than its competitors.
Therefore, when comparing 1Q22 with 1Q21, we see an increase of 1.3%, raising the company’s EBTIDA to R$ 4.5 billion.
Even with an increase in debt and a reduction in spending per user, VIV demonstrated a great quarterly result and resilience. In line with its policy with investors, it approved a share buyback while continuing to pay dividends of around 7%.
High-Yield Brazilian Stock #3: Engie Brazil (ENGIY)
Brazil is an emerging market, and therefore energy is in high demand. There are all forms of energy generation in Brazil such as hydroelectric, nuclear, solar and wind. Brazil seeks to have only clean energy and Engie has approximately 90% of its capacity in these renewable sources.
Engie is the largest private electric energy producer in the country. It has 61 plants representing 6% of the country’s capacity. In addition, Engie has the largest natural gas transportation network in Brazil. There are approximately 4500 km crossing 10 states. This capacity was reached after the acquisition of TAG (Transportadora Associada de Gás) and a new plant is coming to work next year.
Engie presented updates on his projects but that didn’t make the 1Q22 result low. The company is going through a good moment to continue with its projects. It is worth remembering that some of the projects will be delivered soon.
As a result, in 1Q22, adjusted net income increased by 20%, reaching R$636 million. However, its net operating revenue fell by 5% to R$3 billion.
Even with lower energy generation in the period, its economic and financial performance was excellent.
Its indebtedness increased by approximately 10%, however its net debt/EBITDA ratio is around 2.2x. With all that said, Engie provides a 5.1% dividend.
Final Thoughts
The Brazilian stock exchange is composed of many companies with great growth potential in the long run. Even with large inflation around the world, Brazil has some good companies to invest. This article discussed three stocks from the security, telecommunications, and energy industries that have high dividend yields. In this way, we have focused on stocks in Brazil related to infrastructure.
Due to their market leadership, steady profit generation, and high dividend yields, these 3 stocks are attractive for income investors that are interested in diversifying their portfolios.
Other Dividend Lists
The following lists contain many more high-quality dividend stocks:
- The Dividend Aristocrats List is comprised of 65 stocks in the S&P 500 Index with 25+ years of consecutive dividend increases.
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Achievers List is comprised of ~350 stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 44 stocks with 50+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500. - The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.