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TheStreet Open House

China Mobile, Honda Can Drive Your Blue-Chip Yields

NEW YORK (TheStreet) --  In a low-interest-rate world, investors are forced to span the globe seeking yield. Many Asian income stocks offer robust dividends and healthy fundamentals that should please even the most demanding of investors. Three such blue-chips are China Mobile (CHL), Honda Motor (HMC) and Taiwan Semiconductor (TSM).

China Mobile is the world's largest mobile phone company.

If expanding in the China market is vital to the growth of Apple (AAPL), then China Mobile is the gatekeeper. While China Mobile leads in overall subscriptions, it is still lagging for those smartphones, however. That is an opportunity for long-term investors -- the 4G network for China Mobile is supposed to be active by April, which will allow for a deal with Apple.

China Mobile is down this year, but an alliance with Apple should rally the share price. For income investors, the lower stock price results in a higher dividend yield of 3.78%. The average dividend for a member of the Standard & Poor's 500 index is now around 1.9%. With a payout ratio of less than 30%, there is ample cash to raise the dividend or initiate buyback programs to reward shareholders (the mean S&P payout ratio is about 32%).

Honda also offers growth and value along with its 4.99% dividend yield.

The price-to-earnings growth ratio for Honda is just 0.77. Investing legend Peter Lynch considers this to be one of the most important indicators. A fairly valued stock has a price-to-earnings growth ratio of 1 (the lower the better). For Honda, it is just 0.77. The price-to-sales ratio is only 0.69, which means that each dollar of sales is going at more than a 30% discount in the stock price.

For growth investors, earnings per share are expected to rise by 25.80% over the next five years for Honda, up from a negative 5.2% for the last half decade.

Like Apple, Microsoft (MSFT) and Intel (INTC), Taiwan Semiconductor is a high-tech giant with a dividend yield of 2.19%. On a quarterly basis, earnings-per-share growth is more than 25% for the chip maker, topping that of Intel. Over the next five years, earnings-per-share growth is expected to increase by 10.67% for Intel and 15% for Taiwan Semiconductor, based on the average estimates of the analyst community.

According to John Bogle, founder of the Vanguard mutual fund family, dividends have provided more than 40% of the historic total return for equities. The high-dividend yields of China Mobile, Honda Motor Corp., and Taiwan Semiconductor evince the respect that the management has for the rights of minority shareholders to participate in the allocation of capital.

A level of due diligence is also provided as a vibrant dividend framework is a sign of a flourishing enterprise. When the board of directors declares a dividend payment, it is signaling to the investment community that the company has no greater use for the money than to reward shareholders. If the dividend is cut, by contrast, that is a very bearish move by management for the Wall Street community.

Each of these companies is positioned to profit from further growth in Asia.

Speaking at an investor conference recently in Chicago, Dittaker Singh, chief executive and co-founder of TPG-Axon Capital Management, L.P, stated he is very bullish on China and Japan, particularly the consumer sectors. China Mobile, Honda and Taiwan Semiconductor should all perform well with economic growth and consumer demand in Asia increasing. The generous dividends will make the total returns even more rewarding for those owning these high-yield, Asian equities.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.



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