Hi Rick,

Right now Jollibee has 25 stores here in the US but I think its growth opportunity in North America is likely fairly limited. So far most of the US locations are primarily located in areas with large Filipino communities and, even there, Jollibee is having difficulty turning in consistent sales growth. In first quarter US sales actually declined by -0.7 percent.

Right now I would say Jollibee’s greatest opportunity lies in the Middle East where there’s a large population of Filipino workers. Revenues in that region have consistently grown by better than 20 percent. China and the rest of Southeast Asia also looks extremely promising.

At this point I continue to rate Jollibee an excellent long-term holding.

Ben Shepherd

Mr. Wright,

I believe Exelixis is extremely promising and I believe it will likely be approved for prostate cancer.

While Phase III data for that indication won’t be released until sometime next year, a University of Michigan study showed that two-thirds of men with metastatic castration-resistant prostate cancer (mCRPA) showed substantial and dramatic improvement after treatment with Cometriq. However there was a limited sample of about 170 patients and there was some concern about toxicity, so a full Phase III was required prior to approval. But based on the data, a doctor familiar with the clinical trial process said the toxicity was comparable to chemo so the real issue is finding optimal dosing to balance risk with results.

If Cometriq is approved in mCRPA I suspect Exelixis could be in the black within two to three years. It is also being studied in at least six other indications so its market could be radically expanded within the next couple of years.

At this point, I like Exelixis and would stay long on the understanding that there will be more volatility depending upon the news — or lack thereof for the time being.

Ben Shepherd

Hi Fred,

It was great to see you too. I thought this year’s summit was a great success and I really enjoyed talking to everyone.

I avoid loaded funds like the plague they generally are but I think Nile Pan Africa is a special case.

There are a number of relatively low-cost ETFs available that will provide exposure to Africa but I have two general complaints on those; they tend to focus too heavily on politically and economically unstable North Africa and use passive indexing. While I am generally okay with indexing in the fund world, that’s not the way to approach the continent. If you have the time and the ability to do the research, there are pretty clearly delineated good and bad investments, so why take the bad with the good?

Of the available mutual funds, Commonwealth Africa Fund is too new for me to comfortable with and T. Rowe Price Africa & Middle East muddles things too much with way too much exposure to, again, North Africa.

I’m primarily positive on sub-Saharan Africa which Larry Seruma, manager of NAFAX, focuses on. I’ve also talked to him on several occasions and am generally comfortable with both his skill and investment approach. Plus, he’s gotten pretty good results with his funds.

So while I would say 99.99% of the time to run from a fund as soon as the word “load” comes into the conversation, in this case I think it’s probably worth it; it’s one of the few Africa funds available, it has solid management, gets good results and, the reality is, its working in an extremely expensive geography. Nile Capital Management is a pretty small shop and it has to cover its expenses.

I also have confidence that as the fund grows, expenses will fall though there are no break-points built into the prospectus. You can also dodge the load by purchasing the fund through the “no transaction fee” programs at the following brokers; JP Morgan, Schwab, Scottrade, TD Ameritrade and TIAA_CREF. I pulled the NTF information from Morningstar, so I can’t swear that each of those brokers still participates but it’s worth checking if you happen to have an account with any of them. I have no idea how much you plan on buying, but Nile is flexible on the charge with purchases of more than $50,000 per the prospectus.

Ben Shepherd

Hi Louise,

Weyerhauser was not intended as an addition to the resources portfolio, it is simply a resource-related stock that I’m particularly positive on. It has fallen recently after S&P revised its outlook on the company’s debt to negative after its recent acquisition announcement — it will be using debt to fund a portion of the timberland purchase which will increase leverage — and concerns that home sales might slow down with higher interest rates.

I’m not too concerned about either of those points so I would suggest using this current weakness as a buying opportunity.

Ben Shepherd

Apparently no opinion??

Hi Fred,

I still feel quite good about Exelixis and was pretty impressed with their ASCO presentations in June. Cabozantinib showed good 2 year+ survival in MTC and while interim results in pretreated metastatic castration-resistant prostate cancer probably could have been better, it’s still showing real promise and is the best thing around in terms of survivability so far. I suspect when the final data is out next year, Cabozantinib will get approved for mCRPC fairly easily.

Ben

Dear Murphy,
Please excuse, there was a keying error, and the ticker for Dividend 15 Split should have been displayed in the table as it has been in the publication as DFN.TO. Dividend 15 Split trades on the Canadian stock exchange and we have been assured by the company and exchange authorities that there is ample liquidity.

The ticker you used is on a gray market or Over The Counter which is unaffiliated with the company. Again, we regret the error and any inconvenience that may have resulted.

Richard

Just for thought, I own DVSPF via Fidelity, but I check the price on the Toronto exchange, convert that price to USD and use that as my limit price, I believe the fugable DVSPF price may not keep current with the Toronto exchange, or there may be a market maker in the middle. I may be wrong, but it does not hurt to check.

RW,
Thank you for your question. Yes there is a big difference. Having spoke to Dividend 15 Split and the Toronto Stock Exchange – there should be no liquidity issues if you buy the stock under the ticker DFN.TO. The ticker you mentioned has no affiliation with the company and is probably a proxy (pink sheet or ADR) being sold by a third party. And, yes, some of these can be very illiquid and should be avoided. There are a number of online brokerage accounts such as Interactive Brokers where the DFN.TO stock can be purchased directly.

I’ve been in touch with the parent, Duke Energy (NYSE: DUK), which is the largest US utility by market capitalization, which stated that there should not be any trouble in buying shares on the Toronto Stock Exchange as there is liquidity in DEIPY. Of course, the firm still owns 95% of the Brazilian division, and what the utility has made available for investors participation is by definition limited. This is essentially a small-cap, and with a 10.26% dividend yield, has created a lot of demand as it’s affiliated with a large utility firm.

For those that may have difficulty accessing the Toronto Stock Exchange or are uncomfortable buying a small cap stock with fewer shares outstanding, we are recommending to investors in general consider investing in the parent company. This would give investors stakes both in the firm’s regulated operations in the U.S. and its international division, which has even greater exposure to Latin America than its Brazilian spin-off.

Duke Energy’s Brazilian assets are 40% of its international division. The rest of that division has infrastructure investments in Peru, Argentina, and Chile. Duke Energy receives more than 85% of its earnings from its regulated operations in the U.S. and yields 4.4%.

I hope that was helpful.

Richard Stavros

PS: Just a correction on my Duke Energy answer for DEIPY. The stock trades on the OTC and not the Toronto Exchange. That being said, as stated, the parent company has assured me that there is adequate liquidity.

Giulio –
Thank you for your query. I believe in the long-term Seadrill with its more modern deepwater oil drilling rigs is a long-term value play. The current weakness in oil prices and increased competition in offshore deepwater oil rig markets will serve to displace many of Seadrill’s competitors – which have much older, higher cost rigs.

Seadrill has affirmed the dividend through 2015, and we will be watching closely to see over the next months how the firm manages these headwinds.

Richard Stavros

Mr. Allen,

From our sister publication, Canadian Edge:

There are two brokers we favor that provide access to most Canadian securities and facilitate trades at reasonable prices.

The Canadian king continues to be PennTrade, the online trading division of Pennaluna & Company, which charges a flat fee of $26.95 per trade for Canadian stocks and $16.95 per trade for U.S. stocks.

That may be more than what online discount brokers charge for U.S. stocks, but the quality of PennTrade’s Canadian services is superior to its peers, and you’ll have peace of mind knowing that your orders are being properly executed.

The minimum deposit for opening an account is $500, and the initial deposit can be met with cash, equivalent securities or any combination of the two.

If you’re a more advanced and tech-savvy investor, you may want to consider Interactive Brokers’ trading platform. Interactive Brokers is a low-cost leader in providing investors direct access to global markets, and it routinely earns top rankings from venerable publications such as Barron’s.

Interactive Brokers’ one weak spot is customer service. It’s really only in the business of cheaply and efficiently executing trades, not providing research and hand-holding.

Frank –
Thank you for your question.I’ll answer your last first, and your first last. With regard to BREUF – I wouldn’t recommend micro-cap stocks (and shy away from OTC shares) as a good income investment. We typically look at $1 billion market cap as a threshold. BREUF is a $100 million market cap with revenues of $34 million. I recognize the dividend yield of 9.88% might be the attraction here – but with a 547.7% payout ratio and a dividend cover of .0029 (TTM) we have a situation here where earnings are not fully covering the dividend. We like to see ideally a dividend cover of 2X and payout ratios that are significantly under 100% to have confidence in a firm’s ability to consistently pay the dividend over time. So – bottom line – given our criteria – this firm would not be suitable as an income investment.

With respect to ENDTF I wouldn’t buy the OTC shares as you may encounter liquidity issues – the Canoe EIT Close-End fund trades on the Canadian exchange under the ticker – EIT.UN.TO So, I’d say if you can’t buy the TSX traded security – don’t bother. I was surprised to find so many great U.S. names in this supposedly Canadian fund (top holdings are Proctor & Gamble, J.P. Morgan and Wells Fargo).

As you know – it’s trading at a discount to NAV. And I think the reason is that many of its holdings are U.S. (there are many other funds in the U.S. where you can invest and get these names) and the recent fall in oil prices has hit many of its other energy holdings. The fund manager published an update on December 2014 do an update. See link: http://www.canoefinancial.com/assets/pdf/EIT_11_30-14_FINAL_1.pdf

I would hold off on investing for income on any fund or security that is tied to the oil and gas industry. Global Income Edge recently de-risked the portfolio by selling off its oil and gas holdings. So, on that principle I’d steer cleat of the Canoe EIT fund.

Best regards –

Richard

Vincent –
This is an excellent question, thank you. And I plan to highlight it in our next issue (a new Q&A feature in the March publication) so others can more fully understand the Best Buy process which I think will be valuable to all of our readers.

I’m sure my editor will probably somewhat edit this response for publication purposes, but here is my take on your question.

A. As you may know, from a valuation standpoint, all of our stocks are priced using a version of the Gordon Growth Model which evaluates dividend strength. I use an approach to valuation which blends aggressive and conservative valuation scenarios. So, most of the time those Buy limits are set very conservatively. The stocks may have significantly more potential for price appreciation than is conveyed by its limit price, but given that we are an income publication we prefer to be more conservative. So, the percentage from the limit should be viewed as a general rather than precise gauge of our sentiment.

Best Buy assignments usually involve both a quantitative and qualitative factors. In this case, Vodafone was significantly undervalued when we placed it in the portfolio in August with respect to other firms because of the slow recovery in Europe.

But I realized early on in August last year that Vodafone has a very diverse business globally and it was being unfairly penalized for being a European multinational.

Further, as time went on it has become clear that Vodafone has the opportunity to benefit from increased consolidation in the European telecom space, and stimulus from the European Central Bank promises to speed up the recovery in the region and improve the fortunes of firms doing business there. So, it is these last two trends that we’re watching to play out for Vodafone which could significantly enhance shareholder value – and the reason it’s still the #1 Best Buy in our Conservative Portfolio.

But this is not to take away from your observation that our #2 Best Buy is indeed a good value that challenges Vodafone’s claim to the #1 Best Buy throne. Southern’s stock value had been beaten down all last year as a result of concerns that the utility would bear more than its fair share as a result of cost overruns on two new power plants its building.

But it became quickly clear last summer that the company had been able to largely resolve many of these issues, though there have been delays on completing these plants. But given the improved economic situation in the U.S., Southern’s improving electricity demand in its service territory means the firm’s future earnings are on the rise. And the reason we’re optimistic about this firm’s prospects.

I hope that was helpful.

All the best –

Richard

Louis – Please excuse the delay in replying we’ve had a revamp of our financial databases.

A bit crude as it was in an Excel sheet….please let us know if you need any additional info…

Ticker Company Name TTM Dividends Dividend Yield Notes

HCP HCP Inc. 2.26 6.07% 4 dividends of $0.565

SO Southern Company 2.154 4.63% 3 dividends of $0.543 and 1 of $0.525

VOD Vodafone Group Plc 1.741 5.41% 1 dividend of $0.556, 1 dividend of $1.185 and share price of 32.16

MIC Macquarie Infrastructure Corp 4.33 6.58% Dividends: 1.13,1.11,1.07,1.02

AB AllianceBernstein Holding LP 1.93 8.29% Dividends: 0.43, 0.48, 0.45, 0.57

All the best – Richard

Dear George –
Thanks for your query, We are not at present going to change the Buy rating on HCP as we believe there really hasn’t been any new news and the stock is declining on fear selling. Clearly, the fall in shares has been dramatic – along with the broad market – but we believe it will snap back as investors seek safe havens and HCP resolves its short-term ManorCare issues.

On the issue affecting the stock, we’ve known about the ManorCare problem for awhile now, which we think is very serious, but resolvable by a management that has been able to deliver strong dividend through thick and thin, the reason it is a Dividend Aristocrat, having providing 31 consecutive years of dividend increases.

Further the company does have the cash in the short term to keep supporting the dividend. The CFO recently said: “we’ve got $165 million of free cash flow after our dividend payout ratio today, so we’ve got quite a bit of cushion today and continue to have cushion in our dividend payout ratio.”

And let’s not forget that HCP posted revenues of $668 million, comparing favorably with the year-ago number of $603.5 million. And It anticipates 2016 same property performance cash net operating growth, (excluding HCRMC) to be in the range of 1.5% – 2.5% and same property performance cash NOI growth rate of 2.3% – 3.3%. So on balance the firm is still growing.

It’s easy to lose one’s head in this highly volatile environment, but I fundamentally believe a company and management that has had a long track record of high financial and operational performance deserves some latitude to right the ship in stormy waters. And investors will be richly rewarded if they are successful.

That being said, we will be monitoring this firm closely to see if the situation deteriorates, but again we believe the Manor Care problem and the slowdown in the post acute/skilled nursing sector is a short term bump as the gargantuan, long-term senior care needs of retiring baby boomers will prevail.

I hope that was helpful.

Richard

Hi Gayle – Please excuse the delay in responding. Thank you for your question.

High oil prices affected tourism/travel in some of its businesses in the Mideast, and some European travel was somewhat down before rebounding, and an early Easter was also the reason that shares of Aggressive Holding IHG were impacted, according to management and market analysis.

So, we still believe the hotel group will do well in the long-term, but it may face some headwinds as various parts of the world are experiencing slower global growth.

The World Bank this week downgraded its 2016 global growth forecast to 2.4% from the 2.9% pace projected in January. The move is due to sluggish growth in advanced economies, stubbornly low commodity prices and weak global trade.

The IHG CEO continues to have confidence: “Despite economic and political uncertainty in some markets, current trading trends and the momentum behind our brands give us confidence for the rest of the year.”

And certainly the U.S. operations have been doing well, more than half of InterContinental’s rooms are in the U.S., where Revenue per available room (revpar) rose 1.5 percent, driven by record levels of industry demand. Demand was weaker in oil producing areas. The company also bought U.S. boutique chain Kimpton Hotels last year, which help expand its reach into the U.S. upscale segment, according to a Bloomberg report.

The reported added: “European sales did eventually climb 1.4 percent, after terrorist attacks in Paris and Brussels damped travel in the region. Revpar in France was down 2.3 percent. The profitability measure rose by mid-single digits in Germany and former Soviet Union countries.”

We continue to believe Aggressive Holdings such as IHG will be the first beneficiaries when global growth returns, and we’re cautiously optimistic that Europe is on the mend, though it may happen in fits and starts, so investors should allow for higher volatility in the Aggressive Portfolio as a result.

I hope that answers your question.

All the best –

Richard

Hi Karl –
Thank you for your question. Regrettably, we do not cover oil and gas MLPs at Global Income Edge.

For your question, I would direct you to our sister publications, The Energy Strategist or MLP Profits, which cover almost all of the companies that are listed as top holdings in the ETF you referenced. And I’m sure one of our energy/MLP analysts, Robert Rapier or Igor Greenwald, would have something substantive to say on your query.

All the best –

Richard

Hi Karl –
Thanks for your question. We’ve run into this issue in the past with other holdings where the company deviates when and how it pays its dividend, European don’t spread out the dividend evenly as U.S. firms do, and in various circumstances have different criteria.

We’ve been in touch with IHG to double check the math as it is being calculated by them and by financial data reporting agencies, and will be in touch shortly.

We had a recent case where the financial data firms that provide info to Yahoo, Bloomberg and Cap IQ perpetuated an error because they extrapolated a second smaller dividend payment as the forward yield. Finally, when the error was pointed out the dividend yield was reset globally.

All the best –

Richard

Karl –
After receiving correspondence from IHG, which I will share below, my conclusion is that the recent global financial volatility, Brexit and currency impacts must have been largely responsible for the odd dividend yield reporting, which is typically based on last year’s payouts.

At this writing, when I look at my S&P Capital I.Q. terminal shows a 23.5% dividend yield, but when I look at Yahoo Finance it’s 2.83%. I would stay with under 3% as an expectation.

I went back to when we first recommended the stock in January, and the dividend yield at the time was just under 2%. We had chosen the company mostly for dividend growth based on the the improving European growth picture, pre Brexit. Further, given the strengthening dollar, which is making European travel cheaper, and it’s globally diversified, this company will benefit in the long-term as global economies recover.

From IHG investor relations, they made the following points in an e-mail;

“We don’t give forward guidance on these matters, but looking historically I’d make the following points:

1. In terms of ordinary dividend, we paid (i) 77 cents per share for financial year 2014 (announced Feb 2015) and (ii) 85 cents per share for financial year 2015 (announced Feb 2016). Based on the share price the day before we announced the final dividends, (i) represented a 1.9% yield and (ii) was a 2.4% yield.

2. It is a stated policy that after (a) investing as needed in the business, our next priority is to (b) continue sustainable growth in the ordinary dividend. Since 2014 we have grown the ordinary dividend at a CAGR of 11%.

3. After (a) and (b) we have stated that we will look to return excess cash to shareholders – for example via the May $1.5b special dividend that your correspondent mentions. Since 2003 we have returned over $12bn to shareholders, about 2/3 of which reflects the proceeds from the now-complete asset disposal programme, but the other 1/3 is generated from our regular free cash flow.

4. In terms of this free cash flow we generated over $400m p.a. for the last six years, with the ordinary dividend cost running a little below $200m in the last few years. A continuation of that trend would mean that we have capacity for further returns.”

I hope this answers your question.

All the best –

Richard

PS: another reason for the problem in dividend yield reporting in this case, is that many financial databases use a trailing 12 month model which changed when they included IHG’s special dividend. This is what I think happened as we have seen this occur on other occasions when other European companies have issued special dividends. We do try the best we can to identify the irregularities when they happen, but like yourself, we are all somewhat dependent on the financial data reporting companies.

Post your OFI question on the OFI discussion board, not the Global Income Edge discussion board.