Brazil's Yield Surge, America's Income Slump: A Tale of Two Dividend Strategies
Mid-day analysis reveals a dramatic investor rush into Brazilian state-backed yields, while US income staples like Pfizer and Verizon face intense technical and fundamental selling pressure.
R-99 Dividend Income Watchlist Mid-Day Analysis
Proof that the market in New York this morning is pricing in Fed policy rate cuts is evident in my 12-stock Dividend Income Watchlist. This 12-stock list comprises seven US companies and five South American companies (one Colombian and four Brazilian).
The average market cap is $65 billion. The Average Current Yield and PE are 9.3% and 10.3x. However, the Average Current Yield and PE of the domestic group are 7.1% and 11.9x, whereas the international group has a higher yield of 12.4% and a lower PE of 8.0x.
There is a stark difference in price performance over 1 week, 1 month, and YTD among these groups as well. Overall, the figures are 1.3%, 3.7%, and 10.3%. However, for the seven domestic stocks, the figures are: -1.2%, 1.3%, and 5.4%, whereas the international group’s performance is far superior at 4.9%, 7.2%, and 17.2%.
Today’s mid-day session reveals a stark divergence between high-yielding emerging market equities and domestic income stalwarts, underscoring a pronounced risk-on appetite for uncorrelated yield against a backdrop of domestic economic uncertainty. The primary narrative is a powerful rally in Brazilian assets, led by state-controlled enterprises, which is juxtaposed against significant technical weakness and fundamental skepticism in several large-cap US dividend names. A secondary theme is the market's severe punishment of companies facing firm-specific headwinds, irrespective of their headline yield, indicating a highly selective and discerning income strategy among investors.
Generally, the companies that pay the highest yields in my watchlist face higher risks from capital structure and government intervention.
In terms of dividend yield, payout ratio, and dividend safety, here are my notes:
Ecopetrol ADR 18.9% ~110–200% Volatile, likely cut, sector/policy risk
Petrobras ADR 13.7% ~198% Debt-funded, policy/geopolitical risk
Centrais Elétricas Brazil 7.3% ~50–70% Secure, utility
Vale ADR 7.1% ~40–60% Secure, commodity sector
Altria 6.4% ~80% Covered, stable demand
Verizon 6.1% ~50–60% Secure, telecom
Rithm Capital 8.0% ~80–100% Moderate risk
MPLX LP 7.6% ~70–80% Covered, midstream/pipeline
Energy Transfer 7.5% ~70–90% Covered, pipeline/infrastructure
Pfizer 6.9% ~50–60% Secure, pharma
Enterprise Products Partners 6.9% ~50–60% Secure, pipeline/infrastructure
Key performers are overwhelmingly concentrated in Brazil, with Centrais Eletricas Brasileiras (EBR) and Energy of Minas Gerais Co (CIG) posting spectacular one-month gains of 19.1% and 11.2% alongside towering yields of 7.27% and 15.11% respectively. Their perfect Total scores of 200 reflect a powerful convergence of positive momentum across all time horizons (AT, ST, IN). This surge, particularly in the face of a strong US dollar, suggests a market bet on Brazilian macroeconomic stability and a hunt for sovereign-backed yield. Vale (VALE) and Ecopetrol (EC), while also strong, show a more moderate inflow score (90), indicating the rally may be more nuanced for commodity exporters. Conversely, the laggards present a telling story. Petrobras (PBR) stands out as a significant anomaly; despite a robust 13.73% yield, it possesses a negative Total score of -10. Its negative YTD performance (-4.1%) and catastrophic one-year return (-19.3%) severely undermine its income proposition, highlighting a deep fundamental distrust that overshadows its attractive dividend. This divergence between its high yield and dismal score is a classic indicator of a value trap, where the market prices in a high probability of a dividend cut.
Domestically, the picture is mixed but leans bearish. Midstream energy partnerships EPD and ET demonstrate resilience with positive Total scores (145 and 65), although ET’s negative YTD performance highlights underlying sector concerns. The most severe negative scores are reserved for companies with identifiable firm-specific risks. Pfizer (PFE), with a yield of 6.9%, earns a disastrous Total score of -140, as its negative performance across all measured periods reflects the normalization of post-pandemic earnings and a barren near-term product pipeline. Similarly, MPLX’s (MPLX) negative score of -70, despite a positive YTD return, reveals a concerning breakdown in its intermediate-term technicals. The performance of Altria (MO) is particularly instructive; its strong price gains and high score (140) demonstrate that in the right regulatory environment, high-yield domestic equities can still thrive, making the weakness in PFE and VZ all the more pronounced.
Generally speaking, caution is warranted for stocks with double-digit yields, as high payouts often precede reductions, and are particularly dangerous in late-cycle bull phases of the broad market. Lower-yield, consistent payers in stable industries (telecom, utilities, logistics) tend to present far less risk for sustained dividend income.
A final note is that I removed UPS from my watchlist for today only, as I plan to conduct a deep-dive report on this fascinating case. The stock has tumbled for three years, primarily due to its business dealings with Amazon and partly because of the decline in post-COVID-19 business. However, despite the stock chart's appearance, the company is financially solid and offers a 7.54% current yield with a 12.9x P/E ratio.
Processing Note: I updated my proprietary scoring matrix this week to include a Short-Term Investor/Trader Score, in addition to the AT (Algo score) and IN (Institutional Investor score). I use the scoring matrix for decision support.
References — Reuters: "Brazilian Power Utilities Surge on Macro Hopes, Luring Yield Seekers"; "Petrobras Dividend Skepticism Grows Despite Double-Digit Yield"; "Pfizer Leads US Dividend Rout as Post-Pandemic Reality Bites".