Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) operates in Paraguay and most other South American countries. Petrobras shares had a bad 2013 – down 20% -- with problems from falling prices and output estimates to rising labor costs. Problems will likely continue in 2013, but Brazil is set for a better year and Petrobras may finally be able to raise domestic fuel prices. Risk and uncertainty are priced into Petrobras’s shares, but with a 5.1% dividend yield and a P/E of 13, it looks like a much better risk than a poor and landlocked country’s foreign debt.
For an all but guaranteed dividend and exposure to every Latin American market, look no further than The Coca-Cola Company (NYSE:KO) . With a dividend yield of 2.7%, you would be going down only two percentage points from Paraguay’s sovereign debt for a huge reduction in risk. Coca-Cola has not only preserved its dividend through hard times, it’s raised it every year for the last 50. However, security comes with a price and Coca-Cola is the most expensive stock of the bunch, with a P/E of 19.
The international market is full of deep risks and opportunities. Looking abroad can lead you to excellent yields and huge upsides, but international investments can also be harder to research and keep track of. None of these companies are risk-free, but I wager that they will provide better and safer returns over the next ten years than Paraguay’s foreign debt.
The article One Way Not to Chase Yield originally appeared on Fool.com.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.