This 5.2% Yielder Is Solving A Global Problem
Sometimes you need to venture off the beaten path to find the best investment ideas.
As Chief Investment Strategist of StreetAuthority’s High-Yield International newsletter, I can personally attest to the truth in that statement.
I spend my days in search of the best dividend payers around the world, unearthing the kinds of high-yielding investment ideas you’re not likely to hear about anywhere else. This has allowed my subscribers and me to earn double-digit yields from solid international companies, while most investors limit themselves to the paltry yields offered by U.S. stocks.
Today, I want to share one of my latest investment ideas with you — one that I don’t think you’ll hear about anywhere else.
Due to centuries of overfishing, global wild fish supplies have been depleted to crisis levels.
The Census of Marine Life completed a 10-year study in 2010 and found that 90% of the world’s big fish had disappeared from the ocean.
The United Nation’s Food and Agriculture Organization released a study in 2014 that found 87% of the world’s marine stocks fully fished or overfished.
If you are still unconvinced of the magnitude of the situation, consider this:
The National Center for Ecological Analysis and Synthesis at the University of California, Santa Barbara conducted a four-year study on “the historical records of 64 oceanic regions across the globe,” representing 83 percent of the fish species in the world.
The conclusion? The ocean will be almost empty of fish in 50 years.
In the meantime, while the world’s wild fish supplies are being wiped out, the global middle class continues to grow.
The Brookings Institution, a public policy think tank, projects the global middle class to increase by 50% to 3.8 billion in just the next ten years.
These two titanic forces — overfishing depleting global fish supplies and a surging global middle class — are why I am bullish on a business I am referring to as aquaculture, which is farming to raise fish, crustaceans, mollusks and aquatic plants.
With global demand for fish and protein expected to rise sharply in the coming years, the aquaculture industry is in position to account for an increasing percentage of global fish supply.
To get a better idea of growing demand, let’s focus on one of the world’s most popular seafood delicacies: salmon.
Ten years ago, emerging markets consumed 20% of Atlantic salmon. Today, that number has grown to 35%. Looking forward, it is expected to continue rising — growth projections range from 5%-to-10% annually.
Steadily growing demand has helped Norway’s farmed salmon sales more than double in the last 10 years, climbing to roughly 1.2 million tons in 2013 from 509,544 tons in 2003 — a compound annual growth rate of 8.6%.
Strong demand is being driven by the growing global middle class. But it’s also being driven by the benefits of farmed salmon, which is usually less expensive than wild salmon and is available year round.
This consumer demand has led the price of farm-bred Norwegian salmon to increase 68% over the next 10 years. So what does this mean for investors? It means that fish farmers are profiting wildly and are positioned to do so for as long as demand and prices continue to surge higher.
That’s why I recently recommended Marine Harvest ASA (NYSE: MHG) to readers of my High-Yield International newsletter.
Marine Harvest is one of the largest fish companies in the world and the No. 1 farmed salmon producer. The company is headquartered in Norway, but sells its fish products across the world.
In the third quarter of 2014, Marine Harvest’s largest market was Europe, accounting for 69% of total sales. North and South America accounted for 17% of sales while Asia accounted for 10%.
Shares trade on Norway’s Oslo Stock Exchange, but American investors can easily trade them through the American depository receipts (ADRs) that trade on the New York Stock Exchange. (As I have discussed before with my High-Yield International readers, the domestic listing provides a number of benefits to U.S. investors. That includes convenience, increased liquidity, lower trading commissions and familiar regulatory standards.)
Marine Harvest offers a diverse portfolio of fish products, including trout and white fish, but its most important product and primary revenue line is salmon. In 2014, Marine Harvest was estimated to have produced 414,000 tons of salmon — giving it approximately 27% of the global farmed salmon market.
That market leadership has Marine Harvest in position to not only capitalize on the two powerful trends mentioned above, but to offer sky-high dividend yields.
Marine Harvest has a floating dividend payment policy. That means its dividend payments are based on its financial performance as opposed to a fixed value. The company’s dividend policy says that when its debt-to-equity ratio is less than 0.5, at least 75% its annual free cash flow after operational and financial commitments will be paid to shareholders as dividends.
Currently the stock yields 5.2%.
Marine Harvest is just one of many international stocks offering outsized yields that are far better than what you’ll find by limiting yourself to U.S. securities. To learn more about the best opportunities to capture international exposure and robust dividends, click here.