5 High-Yielding Exporters To Own Now
You wouldn’t think this was an opportunity.
In the last three months, only the Euro dropped further than the Canadian dollar.
Canada’s currency recently hit a five-and-a-half year low. And because of two powerful catalysts — which I’ll tell you more about in a moment — I expect its value to remain depressed at least through the end of 2015.
But this is good news in disguise. If history is any guide, then foreign investors could be positioned for major profit opportunities from this country in the months ahead.
In the first quarter of 2015, the Canadian dollar fell 7.14%.
#-ad_banner-#Two powerful trends have been holding down the country’s dollar. I don’t expect either of them to change soon, but together they’re creating a clear divide in the country’s economy. One side is making major profits right now, the other is losing out.
I can show you how to profit from the winners, but first let me show you what’s going on.
Interest Rate Increases
The Federal Reserve is the only major central bank in the world considering raising interest rates. With the U.S. economy gaining strength, expectations of interest rate hikes have sent the U.S. dollar on a historic rally.
In the meantime, other global currencies that are benchmarked against the U.S. dollar have been crashing — especially the Canadian dollar.
Sensitivity To The Price Of Oil
The second reason for Canada’s falling dollar is that the country is the fifth-largest exporter of oil in the world. When the price of oil is high, the Canadian economy benefits and the Canadian dollar strengthens. When the price of oil is weak, the Canadian economy takes a hit and its currency falls.
Neither of these factors is about to change. The U.S. Federal Reserve is likely to remain focused on raising interest rates and, by recent historical standards, the price of oil should remain weak at least through the end of the year.
So who are the winners and losers?
Importers Versus Exporters
For Canadian importers, the weak Canadian dollar is a curse.
It increases their cost structure and pressures margins. You can see this on display in the Canadian food market. Food prices in Canada increased 4.6% in the 12 months that ended February 2015.
But for Canadian exporters, the impact is the opposite.
Canadian goods are on sale — particularly for U.S. consumers. You can see this in Canada’s trade data. Canadian exports are up almost 10% in the last year, while its manufacturing sector jumped almost 5% in 2014 — making it the second fastest-growing sector behind Alberta’s oil fields and related rail and pipeline industries.
Looking ahead, there is plenty of time for foreign investors to capitalize on weakness in the Canadian dollar.
Take a look at these Canadian manufacturers and exporters positioned to benefit from the weak currency. They also offer dividend yields greater than 4%.
|Company||Market Cap||Yield||P/E Ratio|
|Potash Corp. (NYSE: POT, TSX: POT)||$27 B||4.7%||18|
|Acadian TImer (OTC: ACAZF, TSX: ADN)||$318 M||4.7%||7|
|Teck Resources (NYSE: TCK, TSX: TDK-A)||$9 B||5.7%||31|
|Evertz Tech. (OTC: EZTZF, TSX: ET)||$1.2 B||4.3%||18|
|Russel Metals (OTC: RUSMF, TSX: RUS)||$1.7 B||5.6%||14|
From the group above, one name in particular stood out. It’s a perfect example of the sort of company that actually benefits shareholders when its native currency falls.
Acadian Timber Corp. (OTC: ACAZF, TSX: ADN) is a leading timber developer and distributer based in Vancouver, British Columbia. It owns an impressive portfolio of assets, managing 2.4 million acres of land in New Brunswick and Maine.
The company has been on a roll for the last year. Shares are up 47% in the last 12 months, more than seven times Canada’s benchmark index. Those gains have been driven by a record year of revenue, with sales up 4% in 2014 to $77 million.
And looking forward, I expect another year of record revenue.
A leading timber-industry research firm projects world lumber prices to hit record levels by 2017 for two reasons.
The first is rising housing starts in the United States. In 2014, U.S. housing starts increased 8.8% from 2013 to 1.06 million. Researchers project U.S. housing starts to increase to 1.46 million by 2019.
With the United States as the company’s largest export market, the company will be in position to capitalize on steadily growing demand.
The second reason I expect record revenue from the company in 2015 is due to supply issues. British Columbia pine forests have been ravaged by an infestation of pine beetles, severely limiting factories’ ability to increase production and meet demand.
Adding these two factors together — steadily rising demand in the face of falling supply — I see the perfect cocktail for record revenues in the next few years.
Acadian is also one of the best and most reliable dividend payers in the industry, paying a quarterly dividend since 2006. But last February, the company announced a 9% dividend increase, putting its yield at a 45% premium to the industry average.
Best of all, its largest export market is the United States, so the company is taking full advantage of the imbalance between the U.S. and Canadian currencies.
Despite all this — a promising outlook and industry-leading dividend — shares are trading at a sharp discount to the S&P 500 and industry average. Its P/E is a 42% discount to the industry average and a 56% discount to the S&P 500.
This is just one of my top picks this month. Each of the Canadian manufacturers and exporters in the list above is likely to benefit from the weakness in the Canadian dollar.
However, Canada is only one of the options investors have when it comes to profiting overseas. In my premium service, High-Yield International, I constantly discover handfuls of robust and reliable dividend paying companies located around the world. If there’s ever been a time to consider international high-yielders, this is it.
I’ve compiled a special report with all my research on a handful of these international picks, some of which yield 6%, 8% or even 11%. You can learn all about how to access this report, which I’m giving away for free, by going here.