Expert Recommendations: Top Stock Picks in Latin America for Dividend Hunters

Bloomberg Línea — When it comes to acquiring a share, there are several variables that an investor must take into account: liquidity (also known as tradability) of the stock, investment horizon, the risk involved, in addition to evaluating the company’s own ratios, such as price-to-book value or price-to-earnings ratio, among others.

And, beyond the upside potential offered by equities in terms of prices, there is another factor to consider when thinking about how much money you can make: the dividends they pay to shareholders. In fact, there is an interesting metric when evaluating what shares offer in this regard: the dividend yield, which measures the dividend yield of a stock in relation to its current price. It is calculated as the annual dividend per share divided by the current share price.

Dividends in Latin American stocks

“Dividends play a fundamental role in investment strategies in Latin America, as they offer investors regular income and stability amidst the economic volatility characteristic of our region,” explained the private banking team at Adcap Grupo Financiero (an Argentine-origin firm) to Bloomberg Línea. They also added that dividends provide opportunities for reinvestment and income diversification.

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Furthermore, executives in this field indicated that they “recommend” investors to explore stable companies from various sectors that offer attractive dividend rates as a strategy to withstand financial challenges in the region.

In this regard, Adcap Grupo Financiero provided a list of Latin American companies they often recommend and that pay dividends, taking into account stocks traded on Wall Street:

• Ecopetrol (EC): A Colombian oil and gas company and one of the major companies in Latin America.
• Petrobras (PBR): A Brazilian oil and gas company, one of the largest in Latin America, operating in oil exploration, production, and refining.
• Companhia Siderúrgica Nacional (SID): A Brazilian steel company engaged in the production and marketing of steel products.

• Sociedad Química y Minera de Chile (SQM): A Chilean company dedicated to the extraction and production of minerals and chemicals, including lithium and iodine.
• Ternium (TX): An Argentine steel company focused on the production and marketing of steel products.
• Banco Bradesco (BBD): One of the major Brazilian banks offering banking and financial services in Latin America.
• Ambev (ABEV): A Brazilian beverage company known for the production and distribution of beers and soft drinks.
• Itaú Unibanco (ITUB): One of the largest banks in Latin America, with banking operations in several countries in the region.
• VALE: A Brazilian mining company specializing in the extraction and production of iron ore and other minerals.

The Brazilian Reference

Argentine consultant Leonardo Chialva, a partner at Delphos Investment, noted that in his opinion, Brazil has the best examples in terms of dividends in Latin America. Chialva pointed out: “Petrobras is a reference for dividend equities. It has its risks due to government control, but they have been relatively limited. Many of the companies that pay dividends have commodity price risk. For Petrobras, it’s crude oil, and the risk is related to the spread between domestic and external prices. Other Brazilian stocks with attractive dividends and commodity risks include Gerdau, Vale, and Compañía Siderúrgica Nacional.”

Alternatives in Mexico

Mexican expert Brian Rodríguez Ontivero of Grupo Monex noted that when recommending companies to invest in, they always look for companies with solid fundamentals and high tradability since they are the ones with greater resilience in times of uncertainty. Therefore, when responding to the question of which stocks are considered the best for dividend seekers, the executive referred to companies that are well-positioned in a virtual ranking among those that offer the best dividends and also show the mentioned stability.

Based on this, he mentioned two airport operators (OMA and GAP), as well as FEMSA (the world’s largest bottler) and finally the retail giant Walmex (Walmart de México y Centroamérica).

“Grupo Aeroportuario del Pacífico (GAP) and Grupo Aeroportuario Centro Norte (OMA) allocated attractive dividends for this year, with a dividend yield of 4.7% and 3.5%, respectively. Walmex, 3.7%, and FEMSA over 2%. These are highly tradable companies with solid fundamentals for the end of the year and also for 2024,” Rodríguez expressed.

Opportunities in Colombia

To discuss Colombian stocks, Bloomberg Línea reached out to Juan David Ballén, Head of Investment Strategy at Grupo Aval. Ballén presented the portfolio of suggested stocks, among which are some companies known for their dividends:

• Grupo Energía Bogotá (GEB): “Attractive dividend yield of over 10%,” as highlighted in Grupo Aval’s document.
• ISA Holdings: “Increasing dividends for over two years, with a double-digit compound annual growth rate.”
• Bancolombia: “Double-digit dividend yield and a 13% increase compared to the dividend distributed in 2022.”

Stocks in Chile

“As for dividend attractiveness, we recommend Banco de Chile, Santander, Aguas Andinas, Andina-B, and some utilities,” said Aldo Morales, Deputy Manager of Local Equity Studies at Bice Inversiones.

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