As the debate rages in the U.S. over the minimum wage, we can all agree that it’s awfully hard to support a family on the current $7.25 an hour rate.

 

#-ad_banner-#Yet for many people living in emerging markets, $7.25 a day — let alone $7.25 an hour — has  meant a ticket to the swelling ranks of the middle class.

 

In fact, $10 a day seems to be the magic number. In many emerging market economies, that’s the pay rate at which consumers start to consider discretionary purchases.

 

China is a prime example. According to a report published by McKinsey and Company, Chinese consumers purchase appliances, such as refrigerators and washing machines, as their incomes approach $10,000 annually.

 

One company is prepared to smack what Warren Buffett refers to as the “fat pitch”: Whirlpool Corp. (NYSE: WHR).

 

 

In two years’ time, the stock has more than tripled, which leads to the question: Can this stock  go higher? 

 

Yes it can. By 2030, 60% of the world’s one billion households will be earning $20,000 a year or more. Almost all of the growth will be coming from the developing world.

The world’s largest manufacturer of major appliances, Whirlpool produces its products in 11 different countries and markets them globally under a variety of different brand names. Their purchase of rival Maytag in 2006 cemented its slot as the king of the major appliance hill.

 

North America comprises 54% of annual revenues, thanks to the company’s rock-solid distribution channel and strong brand recognition with names such as Maytag, Amana, Kenmore, Kitchen Aid, Jenn Air and, of course, Whirlpool. Latin America represents a strong 26% of yearly sales followed by Europe, the Middle East and Africa (EMEA) with 14%. Asia, surprisingly, only contributes 4%, and that’s where the opportunity lies.

 

While Whirlpool faces fierce competition in Asia from the likes of Haier Electronics Group Co. Ltd. (OTC BB: HRELY), LG Electronics, Bosch Siemens (OTC BB: SIEGY), and Samsung, the company understands the region’s importance. To bolster regional growth,  Whirlpool acquired a 51% controlling interest in Hefei Rongshida Sanyo Electric Co. Ltd., a leading appliance manufacturer headquartered in Hefei, China.

 

Domestic Recovery

Stateside, Whirlpool’s sales have rebounded since the housing crash of 2007. Annual revenues have grown at a 10% annual clip over the past five years to around $19 billion in 2013.

 

Earnings per share growth is even more impressive. The company has boosted EPS at a five year average annual rate of 27%. Analysts expect earnings to grow to 28% this year.

 

The balance sheet is in great condition as well. Long-term debt-to-capital sits at an extremely comfortable 25%, while the dividend payout ratio is just 23%, thanks to steady annual cash flow growth of 5%. Remember, as a portfolio manager, I don’t like to see a payout ratio higher than 60%. This one is way below my bogey.

 

Risks To Consider: As we saw in 2008, Whirlpool remains very sensitive to global economic activity. Indeed sales are predicted to be flat-ish in Latin America and Europe due mainly to economic weakness in Brazil and most of the Eurozone.

 

The offset will be the 54% of the business represented by U.S. sales. As the U.S. housing market improves, so should demand for household appliances.

 

Action To Take –> The global middle class is growing rapidly. Emerging market consumption is expected to grow to $30 trillion annually by 2025, and Whirlpool is ahead of that puck.

 

Currently, shares trade around $174, which is an 8% discount to the 52-week high. Though I tend to shy away from triple-digit priced stocks, the overwhelming evidence suggests that Whirlpool is a helluva long-term investment idea.

 

The company has grown its dividend by an annual average of 7.6% over the last five years, and shares trade for just 15 times forward earnings. Compare that to stocks in other sectors that will benefit from global, middle class growth like The Procter & Gamble Co. (NYSE: PG) or Unilever Plc (NYSE: UL), which  sport forward price-to-earnings ratios of around 20. When you are gaining 27% EPS growth, 15 times forward earnings is not an outrageous price to pay.

 

While I’m hesitant to set a long-term price target on the stock, shares are capable of reaching $220 over the next 12-to-18 months. Combined with the 1.7% dividend yield, that’s a total return of 28%. Longer term, though, shares have the potential to climb much higher.

 

If you are looking to expand your exposure to international markets, then High-Yield International is your best source for investing trends, opportunities and sky-high yields abroad. In fact, 79% of the world’s highest-yielding stocks are overseas. For more information about international investing, click here.