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Brazil Dynamo Generates Hot Yield
05/18/2011 2:52 pm EST
Sao Paulo electricity producer CPFL Energia is in the sweet spot of the Latin American development boom, writes Louis Navellier in Blue Chip Growth .
CPFL Energia (CPL) is a major electricity provider in Brazil. CPFL distributes electricity to approximately 6.4 million customers throughout 570 communities, primarily in the states of Sao Paulo and Rio Grande do Sul.
Latin American countries are experiencing stunning growth, as commodity prices raise the value of their exports, boost the economy, and bring more consumers into the middle class.
And CPFL is at the heart of possibly the strongest growth center in South America. Brazil has been growing its GDP at 7.5% annual rate, and it takes electricity to keep that growth engine running.
The company's operations are concentrated in Brazil's most developed regions and the ones where electricity consumption grows the fastest. In emerging markets, electricity consumption rises rapidly because of more construction and infrastructure development, and the fact that individuals have the money to buy and use products that require more electricity.
CPFL is already the electricity king in this region, and it's not going to let anyone take that away from them. Management is investing serious amounts of cash to build capacity in the next four years—4.6 billion reais (approximately $2.9 billion) in distribution and 1.8 billion reais ($1.1 billion) in generation capacity—in order to meet market demands.
Electricity for CPFL comes primarily from its hydroelectric power plants, generally a cheap and reliable source of power. In 2009, CPFL Energia provided 13% of Brazil's electricity, and the percentage continues to grow.
This is enough to get my palms itching for this stock, but I haven't even mentioned the dividend yet. The kicker with CPL is its yield. [At the US-traded ADR’s recent share price near $90, the $4.72 in dividend payments made in two semi-annual installments over the last year work out to a trailing yield of 5.2%—Editor.]
With its growing customer base, in-demand services and high dividend yield, CPFL Energia is a great long-term investment.
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