Nick Lanyi says that while China and India tend to grab the bulk of the emerging market headlines for their explosive GDP growth, there are several others countries that also deserve attention – and are actually a better bet if you’re looking for easy income.

Why China And India Are The Worst Places For Income-Seekers

If you’ve picked up a newspaper, or followed the business headlines over the past few years, then you’re no doubt familiar with the biggest theme in global economics these days: The tremendous boom in China and India.

Thanks to globalization, increased free trade, and a hunger for low-cost labor, both countries have enjoyed outstanding GDP growth rates over the past decade. For example, China’s GDP rose 11.4% in 2007 and is expected to jump another 10% this year. Meanwhile, India’s economy expanded 8.9% last year and should continue to churn ahead at an 8.4% pace this year.

It’s easy for investors to get excited about these countries because the potential is real, and their phenomenal growth should continue for years, if not decades. But there’s a problem…

If you’re an income-seeking investor, then China and India are terrible places to search for high yields. For the most part, companies in these two emerging markets pay little or no dividends because they’re too busy re-investing cash into their businesses, or acquiring competitors, as they strive to keep up with the surging economy.

So how can income investors take advantage of economic growth, yet still lock in solid dividend yields? The answer is simple: Invest in other Asian countries that are directly benefiting from the economic boom in China and India.

There’s An Asian Boom… But It’s Not Just China And India

While China and India may grab the bulk of the headlines, stocks in surrounding nations like South Korea, Japan and Singapore have also delivered very strong returns in recent years. The table below tells the tale – and the same phenomenal growth story applies throughout the rest of Asia.

 

Country/Exchange	5-Yr. Annualized Return
Shanghai	+31.7%
Hong Kong	+27.3%
Singapore	+24.6%
South Korea	+23.9%
Japan	+13.6%
U.S. (S&P 500)	+11.9%
*All data as of December 2007

As you can see, many Asian nations are enjoying an economic boom – thanks in no small part to what’s happening in China and India. As these two economies have grown, it’s led to increased trade with their neighbors, as well as higher demand for natural resources and other important exports from surrounding countries like Singapore and South Korea. This has fueled strong economic growth throughout the entire region.

The question is: Where can we find the best dividend-yielding stocks?

Singapore Swing

While the pickings are slim when it comes to high-yield stocks in China and India, the solid economic growth across the region means surrounding companies are generating strong cash flows – cash they’re returning to shareholders in the form of high-quality, steadily-growing dividend payments.

And the best destination? Although there are a number of promising Asian nations, one of my favorite high-yield hunting grounds is Singapore.

Singapore is a tiny city-state, made up of 63 islands, but with a geographic size of just 272 square miles. It has a population of less than five million – less than half the size of Los Angeles.

But while it masquerades as a geographic midget, in reality, it’s an economic giant. It’s also one of the most business-friendly and efficiently run nations in the world. It’s also a developed market that boasts a high standard of living. On a GDP per capita basis, Singapore ranks above such countries as Spain, Portugal, and Greece and just behind Italy, Australia, and Canada.

A Hub For Finance And Shipping… With Eased Labor Laws And Low Taxes

Early on, the Singapore government recognized that it couldn’t compete with China on manufacturing labor costs. Nor can it compete with India on price for certain services.

Instead, Singapore re-focused its economy on high value industries such as financial services and technology. As a result, the country has become a key banking and financial services center within Asia, and it remains one of the highest-volume currency-trading centers in the world.

And Singapore is taking steps to make sure it maintains its competitive edge. It’s eased the labor laws, making it easier for workers to emigrate there. Singapore has also enacted legislation to reduce its corporate tax rate to 18%, starting with the 2008 tax year. That means its taxes will soon be among the lowest in the world.

Meanwhile, Singapore’s enviable position at the intersection of various shipping routes has made its port one of the world’s busiest over the past 300 years. As a result, Singapore’s so-called “entrepot” industry – duty-free importing and exporting out of the same port facilities – gives the nation a significant source of income. And Singapore’s close proximity to fast-growing Asian markets like China means it’s one of the biggest beneficiaries of booming Asian trade.

The New Real Estate King

As the once-sizzling U.S. real estate market comes to a grinding halt, Singapore’s real estate industry is in the midst of an incredible expansion.

With limited space, developers have constructed thousands of new homes, but values have still shot through the roof, as demand has outstripped supply. The same scenario has also unfolded in the commercial real estate market for office and industrial space.

With such a strong foundation, it’s no surprise that Singapore’s economy is soaring. GDP growth has climbed by 6.8% annually over the past four years, with 6.5% growth expected in 2008. That’s faster than almost every other developed economy in the world.

And that strength is reflected in the country’s stock market, which has delivered robust returns. In fact, Singapore has been one of the world’s best-performing markets over the past five years.

As you can see on the chart, the MSCI Singapore Index has skyrocketed over 200% since 2003, churning out annualized gains of 27.6% and trouncing the S&P 500 by a 3-to-1 margin. I expect Singapore to continue outperforming the U.S. in the coming years thanks to the implementation of business-friendly reforms, as well as strong demand for exports to China.

Capturing Above-Average Yields In Singapore

The reasons to invest in Singapore are already compelling. But aside from strong economic growth and the other factors mentioned above, the nation also offers high dividend yields.

For example, the average Singapore stock now yields about 3.5% – nearly twice the level seen in the U.S. And remember, that’s just the average. Many stocks in Singapore are actually dishing out yields of 6%… 8%… even 10% or more.

I believe the income-based opportunities in Singapore, as well as several other attractive nations in Southeast Asia, are now so good that I highlighted them in the most recent issue of my newsletter, High-Yield International.

I went in search of high yields in Singapore and profiled some of my favorite high-yield picks in the region, including a fast-growing company that is scooping up some of Singapore’s most valuable real estate. Thanks to strong economic growth, real estate prices and rental rates are booming, helping this firm deliver 49% revenue growth and an impressive 9% dividend yield.

If you’d like to learn the name of this high-yielding Singaporean real estate play – plus receive a steady stream of foreign stocks, funds and other investing ideas with high dividend yields each and every month – then consider this my personal invitation to you to try my international investing newsletter, High-Yield International. Visit this link to learn more.

Nick Lanyi
Editor, High-Yield International