01/16/2014 6:00 am EST


Carlton Delfeld

Editor, The La Jolla Letter and Pacific Gains

My conservative favorite for the coming year is the largest water utility in Brazil; it is majority-owned by the state of Sao Paulo, and provides water and sewage services to over 25 million people, notes Carl Delfeld, editor of Capital Gains.

Companhia de Saneamento Basico do Estado de Sao Paulo (SBS) is commonly called SABESP. I like the stock for three reasons:

First, the company has plenty of room to grow in Sao Paulo, other regions in Brazil, and even in neighboring countries. Sao Paulo has a population over 40 million and represents 30% of Brazil's total economic output.

Second, the stock has had a stellar record over the past decade, with an annual earning-per share growth rate of just over 19%. The stock is trading at just 7.5 times earnings and has begun a nice uptrend, which I always like to see.

Third, as a utility, SBS offers a nice 7.82% dividend yield. In comparison, the average dividend yield for a US utility is 4%.

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