Dividend Stocks Trump Foreign Bonds: The Coca-Cola Company (KO), Banco Santander, S.A. (ADR) (SAN), Telefonica Brasil SA (ADR) (VIV)

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Spanish-based Banco Santander, S.A. (ADR) (NYSE:SAN) operates across Latin America. Banco Santander has avoided much of the pain in Spain by making conservative loan decisions and doing business elsewhere, particularly in Latin America. Banco Santander, S.A. (ADR) (NYSE:SAN)’s share price has a beta of 1.8, making it a poor candidate for capital preservation, but its 8.9% yield puts Bolivia’s bond yield to shame.

I rate Banco Santander a long-term buy on my CAPS page. Over the last 15 years, it has spun off its Chilean, Brazilian, and Mexican operations into separate publicly-traded companies as a way to raise cash without taking on debt. The least volatile and longest-lived spin-off, Banco Santander-Chile (ADR) (NYSE:BSAC) has a beta of .9 and a smaller but respectable 3.1% dividend yield. As emerging market bank stocks with betas of .9 and 1.8, respectively, and sizable dividend yields, both companies offer little capital preservation but plenty of income and capital appreciation.

Finally, The Coca-Cola Company (NYSE:KO) is headquartered in the U.S. but operates in every Latin American country. Coca-Cola has a beta of .5 and a dividend that has increased every year for the last 50. Not only is Coca-Cola present in every Latin American country, it has a big and solid business: at $44 billion, Coca-Cola’s 2012 profits were as large as Paraguay and Bolivia’s GDPs combined. The Coca-Cola Company (NYSE:KO) shares offer capital preservation, capital appreciation and, with a yield of 2.9%, income comparable to Brazil’s sovereign debt.

With interest rates hitting historical lows around the world, governments with a high to medium risk of default are offering bonds with yields under 5%. Bolivia, Paraguay, and Brazil have all issued ten-year sovereign debt notes in the past six months and Brazil is readying for a new offering in the coming weeks. The default risks that these bonds carry – especially Bolivia’s — are not worth 3-5% yields. Investors should instead chase yield with high-quality, low volatility regional companies whose shares come with a sizable dividend.

The article Dividend Stocks Trump Foreign Bonds originally appeared on Fool.com and is written by Calla Hummel.

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