A Bullish, High-Yield Bet on Europe

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world.

It’s a rare occasion that a high-yield recommendation offers the upside of this week’s Dividend Pro recommendation, Banco Santander, S.A. (SAN).


In fact, it’s the first time ever that a Dividend Pro recommendation overlaps with a recommendation in my more aggressive Bull Market Alert trading service.

But I didn’t want that situation to stand in the way of depriving you of such an opportunity.

After all, your big, year-to-date gains of 22.95% in Rentech Nitrogen Partners, L.P. (RNF) and 15.97% in CVR Partners, LP (UAN) show that big profits are welcome, whether they come from dividends or an increase in stock price.


So here’s why I think there is big upside in Spain’s Banco Santander (SAN) that goes far beyond its current 7.10% yield.

Put simply, Banco Santander, S.A. (SAN) is a terrific way to profit from the recovery in European stock markets. And boy, are they are recovering remarkably strongly. As of yesterday’s close, year-to-date gains reached 9.58% in Greece, 6.39% in Italy and 5.95% in Spain.

After dominating the headlines over the last two years, the European crisis has clearly abated. Fitch Ratings now reports it’s “very unlikely” that the European Union will be broken up. Last week, the euro surged to an 11-month high against the dollar as European Central Bank President Mario Draghi stated that a combination of an accommodative monetary policy stance, together with significantly improved financial market confidence, should support a recovery in European markets in 2013.

Banco Santander itself is on a firm footing with a widely diversified global business. The company has a large presence in Latin America. And just yesterday, the bank announced it intends to expand its footprint in the United Kingdom.


The stock is also remarkably cheap. With earnings expected to grow by 145.9% in the coming year, it is currently trading at a single-digit price/earnings ratio — only 9.41 for 2013. And as I’ve noted, the stock also yields a solid 7.1%.

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With Spain one of the top-performing markets of 2013, Banco Santander has the wind at its back. So, it’s no surprise that the stock has attracted an unusual amount of call option activity. A lot of smart money is betting on a big upside in Banco Santander in the months ahead.

So buy Banco Santander, S.A. (SAN) and place your stop at $7.75. For potentially bigger upside, I recommend the June $8.00 call options (SAN130622C00008000).

Portfolio Update

Global X SuperDividend ETF (SDIV) rose 1.01% last week, hitting a 52-week high. With global equities continuing their relentless rise, SDIV remains a BUY.


Two Harbors Investment Corp. (TWO) continued to power ahead, rising 1.06% this past week, and hitting yet another new 52-week high. Expected to pay out a good chunk of its 18 million shares of SilverBay (SBY) to TWO shareholders as a special dividend around March, this bet on the U.S. housing recovery remains a BUY.

PIMCO Municipal Income Fund II (PML) rose 0.96%. This position now is almost back up to the level it was before the fiscal-cliff posturing in Washington. PML is a BUY.

Apollo Investment (AINV) bounced 2.51% after last week’s pullback and it also hit a new 52-week high. The company will report its third quarter results for the period which ended December 31, 2012, on Wednesday, February 6, 2013. Trading above its 50-day moving average (MA), AINV is a BUY.

Omega Healthcare Investors Inc. (OHI) jumped 3.83%, breaking out to a five-year high. Omega recently raised its dividend 2.2%, to $0.45 per share, giving it an annual dividend yield of 7.0% at current levels. The common stock dividend is payable February 15, 2013, to common stockholders of record as of the close of business on January 31, 2013. OHI is a BUY.

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PowerShares Preferred (PGX) rose 0.41%, nearing another post-financial crisis high. A monthly income payer with a 6.47% yield, PGX is a BUY.

Fifth Street Finance Corp. (FSC) recovered 0.75%. Look for a monthly dividend of $0.0958 on Jan. 31. FSC plans to report earnings for the quarter which ended December 31, 2012, after the financial markets close on Wednesday, February 6, 2013. I see some issues coming up with the sustainability of the company’s dividends, but for now FSC remains a BUY.


CVR Partners, LP (UAN) soared 4.76%. UAN’s strong growth is expected to continue through 2013. Breaking out to a six-month high, and up 15.97% year to date, UAN is a BUY.

Rentech Nitrogen Partners, L.P. (RNF) jumped 5.76%, hitting yet another new all-time high. RNF will announce 2012 fourth quarter and year-end earnings on Tuesday, March 19. Up 22.95% just this year, RNF remains a BUY.

Annaly Capital Management (NLY) rose another 0.95%. The company’s aggressive share repurchase program continues to support the stock. You’ll receive a cash dividend of 45 cents per common share on Jan. 29, if you were a shareholder of record on Dec. 28. NLY is a BUY.

Peritus High Yield ETF (HYLD) rose 0.30%. Hitting yet another a new 52-week high, HYLD is a BUY.

Northern Tier Energy Trust LP (NTI) tumbled 4.47% on the back of its dilutive public offering, as I suggested it would last week. NTI remains a BUY.

Apollo Residential Mortgage Inc. (AMTG) soared 2.99%. It invests in residential mortgage-backed securities and other mortgage assets, and pays a 12.6% dividend. Your $0.70 per share dividend is payable January 31, 2013, as long as you held the stock on December 31, 2012. AMTG is a BUY.

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SPDR S&P Emerging Markets Dividend ETF (EDIV) dropped back 0.32%. Yielding 5.43%, this bullish bet on emerging markets is a BUY.

UBS E-TRACS 2x Wells Fargo Bus Dv Cm ETN (BDCL) recovered 2.55% last week. With Business Development Companies (BDC’s) a bet on economic recovery, BDCL remains a BUY.

Market Vectors International High Yield Bond ETF (IHY) rose 0.07% last week. A slow and steady performer, this high-yield play remains a BUY.

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