Sunday, June 15, 2014

All Eyes on FIFA World Cup Soccer Games in Brazil: Anyone Looking at Brazil Stocks?

The 2014 FIFA World Cup is the 20th world championship tournament for soccer (referred to as football in most other countries outside the US), which is taking place in Brazil for the next few weeks. The games run from June 12, finishing up on July 13. Think these games should help the Brazilian economy? Then how about Brazil stocks.

Brazil used to be considered the best of the BRICs, with BRIC referring to he four countries with strong growing economies: Brazil, Russia, India, and China. The iShares MCSI Brazil Capped ETF (EWZ) is up three and a half points just in the last week. However, over the last two years, the Standard and Poor's 500 Index has risen well over 40%, whereas the Brazil ETF has a negative return over the same time period. Now might be an interesting opportunity for contrarians.

The nice thing about Brazilian stocks is that there are a couple dozen that trade on US stock exchanges, according to the free list of Brazil stocks at In addition, most of these Brazilian stocks pay dividends. Anyone who has read my previous articles knows that I really like dividend paying stocks. Dividends return your invested capital faster and help to reduce volatility.

One of the highest yielding Brazil stocks is Banco Bradesco (BBD), which pays a generous yield, including special dividends, of 6.8%. As an added bonus, it pays its dividends monthly. This Brazilian bank trades at 1.2 times trailing earnings, slightly better than the industry average price to earnings ratio of 11.3. It has a forward PE ratio of 9.

Bradesco's earnings for the latest quarter were up 18% on a revenue rise of 13%. The company was added to the Zack's Rank #1 Strong Buy List on May 16.

Another Brazilian stock that pays a decent dividend is Telefonica Brasil (VIV), which has a yield of 7.7%. Last year, the company paid out a dividend three times, and so far this year, the company has had three dividend payouts. The stock trades at 15 times trailing earnings, and 13 times forward earnings. Revenues for the latest quarter were up slightly, however earnings dropped 18%.

One Brazil company that is doing very well is Gerdau (GGB), which is in the steel business. The yield is relatively low at 1.9% but the earnings are high. Earnings for the latest quarter were up an amazing 168% on a revenue increase of 15%. The stock trades at 13 times forward earnings and a very favorable  6 times trailing earnings.

There are several other Brazil stocks with good earnings and adequate yields, which can be found at Around 20 of these stocks pay dividends. I'm not sure who is going to win the World Cub, but I think several Brazil stocks will be winners.

Disclosure: Author didn't own any of the above at the time the article was written, but may purchase a Brazil ETF in the next week if prices drop low enough. 


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