Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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Shelter Your Portfolio from
Market Storms with This Safe and Steady Utility |
[http://www.streetauthority.com/includes/article-top-ma.htm]Published:
November 24, 2008
CPFL Energia (NYSE: CPL) is the largest private electric utility in Brazil.
In total, CPL has more than six million customers and total
generating capacity of more than 1,700 megawatts, with operations
concentrated in and around Sao Paulo.
Catalyst(s): Brazilian electricity demand is
growing rapidly thanks to the nation's strong economic growth.
Overall Brazilian electricity generation has soared more than
+25% over the past five years compared to just +7% for
the U.S.
CPL's main area of operation in Southern Brazil is growing
particularly quickly. Sao Paulo is among the most prosperous
regions in Brazil, with incomes and employment rising faster than
the national average. In the third quarter, for example, CPL's
electricity sales in Southeast Brazil jumped +6.6% compared to a
national average of +5.9%. To meet all that demand, CPL has
plans to double its generating capacity over the next five
years.
Another potential growth driver for CPL is acquisitions. The
Brazilian utility market is highly fragmented; CPL is the
largest private player and controls less than 15% of the
Brazilian market. In recent years, CPL has acquired several
smaller firms located in its primary operating region. More
deals are possible for CPL.
Competitive Advantages: CPL's main advantage
is its size and the stable nature of cash flows. To the first
point, the utility industry involves large up-front fixed costs
such as building plants, transmission networks and metering
equipment. But the variable costs associated with adding one
additional customer are tiny -- a utility like CPL can add new
customers without incurring huge additional fees.
It would be tough for a competitor to enter CPL's primary
operating area as they would need to spend large amounts of cash
up-front in an attempt to replicate CPL's network of power
plants and transmission lines.
In addition, size has other advantages. With a large network of
plants using different fuel types, CPL has the flexibility to
generate power in the most cost-effective way possible. And
additional management expenses related to adding a few more
plants or acquiring a small competitor are small; CPL can grow
in size and centralize management functions without adding much
to its ongoing cost base. These factors give CPL a significant
cost advantage over smaller players in the region.
The utility industry in Brazil, like that of the U.S., is
regulated by the government to offer companies a steady return
on their capital. Tariffs charged are adjusted periodically to
account for inflation and CPL is allowed to recoup investments
in new plants via higher tariffs.
Roughly 75% of CPL's customers are captive -- electricity sales
to these customers are covered by regulated contracts that offer
a steady return for CPL and predictable cash flows. The
remaining 25% of customers could switch providers; however, as
the largest and best-established provider in the region CPFL has
a leg-up on winning that business as well.
Valuation and Outlook: CPL trades at 15
times forward earnings, and over the long-term, the Brazilian
market should see electricity demand grow by roughly +5%
annualized with stronger growth expected for CPL's core regions.
And acquisitions could accelerate the pace of growth even more.
Given the stable, regulated nature of CPL's revenues, that
valuation is reasonable.
The main attraction of CPL's shares is the stock's 12.2% dividend
yield. CPL has an established history of boosting its payout to
shareholders over time, and the current yield is roughly triple
the average for a U.S. utility.
Action to Take --> With a
strong dividend yield, exposure to the fast-growing Brazilian
market and a defensive business model, CPL looks like a strong
"Buy" candidate.
[http://www.streetauthority.com/includes/editor-profiles-ma.htm]
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