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Financial development, growth strategies and structural transformation

Kromtit, Matthew (2022) Financial development, growth strategies and structural transformation. PhD thesis, University of Glasgow.

Strategizing economic growth and development in developing countries remains a daunting task for several years. Developing countries for long suffer from the many characteristics of underdevelopment. These range from slow economic growth to high levels of unemployment and poverty, increased population explosion with little or no corresponding increase in productive capabilities. For decades too, the economic literature has shown that several private and public sector-led strategies have failed to guarantee long term economic progress especially in developing countries. Whether mainstream or heterodox, what constitute appropriate growth strategies for developing countries is complex and highly debatable. This thesis therefore generally seeks to ignite better understanding of the strategies for growth and their determinants as well as to renew the debate on the essentials for strategizing growth in developing countries. The thesis attempts to provide some evidence on this general objective by investigating three specific topics in three empirical chapters. This is in addition to introductory and concluding chapters.

Chapter one motivates the thesis and specifies the objectives particular to each empirical chapter. Chapter two focuses on providing evidence on the role of financial development in determining whether developing countries follow or defy their comparative advantage. This area has been largely ignored in the literature on finance and development. Using dynamic panel data spanning across 132 developing countries and two-step system generalized method of moments (GMM), the results of this chapter mainly show that financial development in terms of the depth of banking sector tends to lead to comparative advantage – following (CAF) growth strategy but it tends to lead to comparative advantage – defying (CAD) in terms of financial efficiency. Based on these findings, chapter three introduces the analysis of financial and trade liberalization, interventionists policies and economic diversification in resource-rich developing countries. The empirical evidence reported in this chapter suggest that though liberal and interventionists policies matter in promoting economic diversification – in terms of enhancing manufacturing, the interaction of these policies with regulation could lead to an expanding services sector at the expense of manufacturing in resource-rich countries. Chapter four explores whether global value chains (GVCs) – related trade and conventional trade play a role in the structural transformation of resource-rich and non-resource-rich developing countries. The results show that the share of domestic value added in gross GVC-related exports and conventional trade have the tendency to aggravate employment and value addition respectively in the agricultural sector of Non-Resource-Rich Countries (NRRCs). In Resource Rich Countries (RRCs), the findings show that conventional trade have negative and significant impact on value-added in manufacturing while the share of foreign value added in gross GVC-related trade reports positive and significant impact on share of labour employment in services but not on the value added in the sub-sector.

Thus, the findings of the thesis tend to have implications for what constitute an appropriate development strategy in developing countries. Overall, the findings imply that all hope is not lost in developing countries. Given their factor endowments, developing countries could harness them with the appropriate combination of interventionists and liberal policies as well as the right mix of domestic and foreign value addition in promoting economic diversification and structural transformation. It remains however, a challenge for these countries to draw a line between what constitutes effective strategies or policies thereby leaving room for further research as suggested in chapter five of the thesis.

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The political economy of economic diversification in Nigeria

As Africa’s largest economy and its most populous country, over a decade of rapid economic growth in Nigeria contributed to the 'Africa Rising' narrative. However, like many African commodity exporters, this economic growth, billions of dollars in oil earnings and electoral democracy have not translated into a diversified and industrial economy. This study examines why the Nigerian economy remains so dependent on oil and is non-industrial, which I argue are economic and development outcome...

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Spatio-temporal diversification of per capita carbon emissions in china: 2000–2020.

1. Introduction

2. materials and methods, 2.1. study area, 2.2. data sources, 2.3. per capita carbon emissions, 2.4. markov chain, 2.5. kernel density analysis, 2.6. hotspots analysis, 2.7. spatial regression, 3.1. pces in china, 3.2. spatiotemporal dynamics of pces, 3.3. kernel density, 3.4. change in pces in china, 3.5. driving mechanism of low-carbon transition, 4. discussion, 4.1. interpretation of findings, 4.2. driving mechanisms of low-carbon transition, 4.3. policy implications of low-carbon transition, 4.3.1. promoting the low-carbon transition, 4.3.2. focusing on the spatial agglomeration effects of pce, 4.3.3. coordinating economic growth and ces, 4.3.4. formulating differential strategy, 5. conclusions, author contributions, data availability statement, conflicts of interest.

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Zhang, X.; Zeng, Y.; Chen, W.; Pan, S.; Du, F.; Zong, G. Spatio-Temporal Diversification of per Capita Carbon Emissions in China: 2000–2020. Land 2024 , 13 , 1421. https://doi.org/10.3390/land13091421

Zhang X, Zeng Y, Chen W, Pan S, Du F, Zong G. Spatio-Temporal Diversification of per Capita Carbon Emissions in China: 2000–2020. Land . 2024; 13(9):1421. https://doi.org/10.3390/land13091421

Zhang, Xuewei, Yi Zeng, Wanxu Chen, Sipei Pan, Fenglian Du, and Gang Zong. 2024. "Spatio-Temporal Diversification of per Capita Carbon Emissions in China: 2000–2020" Land 13, no. 9: 1421. https://doi.org/10.3390/land13091421

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Diversity and Bank Performance in Transition Economies: The Mediating Role of State Ownership

• First Online: 30 August 2024

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• Doan Ngan Ha   ORCID: orcid.org/0009-0003-6731-7707 4 ,
• Duong Dang Khoa   ORCID: orcid.org/0000-0001-9855-3751 4 &
• Pham Ha   ORCID: orcid.org/0000-0003-2810-7646 5  

This study examines the effect of diversification on commercial banks’ performance in Vietnam, a transitional economy. The diversification of commercial banks in Vietnam has problems due to the size of the economy and the macro-strategies that focus on state-owner involvement in business. By employing data from 37 Vietnamese commercial banks, the endogeneity problem is controlled; the study finds that diversification negatively affects bank performance. Interestingly, the existence of state ownership is evidence that banks should reduce their efforts to boost their performance. Moreover, the robustness shows that liquidity changes its effects on bank performance in terms of the involvement of state-owners. The findings can be evidence to policymakers to make a transparent and competitive banking sector in Vietnam.

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Acknowledgements

We also thank anonymous reviewers for their constructive feedback, which helps us revise our manuscript. This study was supported by Ton Duc Thang University and Ho Chi Minh City Open University.

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Doan Ngan Ha & Duong Dang Khoa

Ho Chi Minh City Open University, Ho Chi Minh City, Vietnam

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Le Thanh Tung

Faculty of Business Administration, Ho Chi Minh City Open University, Ho Chi Minh City, Vietnam

Nguyen Hoang Sinh

Faculty of Banking and Finance, Ho Chi Minh City Open University, Ho Chi Minh City, Vietnam

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Ha, D.N., Khoa, D.D., Ha, P. (2024). Diversity and Bank Performance in Transition Economies: The Mediating Role of State Ownership. In: Tung, L.T., Sinh, N.H., Ha, P. (eds) Disruptive Technology and Business Continuity. Springer, Singapore. https://doi.org/10.1007/978-981-97-5452-6_22

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Angola’s Economic Diversification: Opportunities Beyond Oil

As one of Africa’s largest oil producers, Angola’s economy has long been dependent on this single sector, with hydrocarbons contributing to approximately 90% of export revenues and around 30% of Gross Domestic Product (GDP). The oil sector’s dominance has rendered the Angolan economy vulnerable to global oil price volatility. For instance, during the oil price downturn between 2014 and 2016, Angola faced a significant economic contraction, with GDP growth slowing from 4.7% in 2013 to 0.2% in 2016, according to the World Bank.

However, recent developments suggest a concerted effort towards economic diversification, which could redefine the nation’s economic landscape. This analysis explores Angola’s diversification strategies, potential opportunities, and the implications for its economic future.

Strategic Diversification Efforts

In response to these challenges, Angola’s government has initiated several strategies aimed at economic diversification. The “Angola 2025” vision outlines the country’s commitment to reducing its dependence on oil by investing in other sectors. Key areas of focus include agriculture, tourism, and infrastructure development.

Agriculture : Angola’s agricultural sector holds substantial potential for growth. With over 58 million hectares of arable land, only a fraction is currently cultivated. The government’s emphasis on agrarian reform and investment in agricultural technology aims to boost production and ensure food security. The International Monetary Fund (IMF) estimates that agricultural diversification could contribute an additional 2% to Angola’s GDP by 2025.

Tourism : Angola’s diverse landscapes, from the Atlantic coastline to the rolling savannahs and unique wildlife, present untapped opportunities for tourism. The Ministry of Tourism has launched initiatives to promote Angola as a tourist destination, aiming to increase visitor numbers and revenue. Reports from the World Tourism Organization highlight that Angola could potentially generate up to $1.5 billion annually from tourism by 2030, a significant increase from the current $200 million.

Infrastructure Development : Investing in infrastructure is pivotal to supporting other sectors. Angola has embarked on ambitious projects to enhance its transport networks, including the construction of new roads, railways, and ports. The African Development Bank’s (AfDB) recent report underscores that improved infrastructure could enhance trade efficiency and foster regional integration, potentially increasing Angola’s trade volume by 25% over the next decade.

Investment and Trade Opportunities

For high-profile investors and business leaders, Angola’s diversification efforts present numerous opportunities. The government’s approach includes creating an enabling environment for private sector participation through reforms in regulatory frameworks and incentives for foreign investments.

Free Trade Zones : Angola has established several free trade zones designed to attract international businesses. These zones offer tax incentives and streamlined administrative processes, making them attractive for foreign direct investment (FDI). According to a report by the United Nations Conference on Trade and Development (UNCTAD), FDI inflows into Angola’s non-oil sectors have seen a gradual increase, reflecting growing investor confidence.

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Public-Private Partnerships (PPPs) : The Angolan government is actively promoting PPPs as a means to drive infrastructure development and service delivery. The World Bank’s recent analysis indicates that successful PPPs could significantly reduce the burden on public finances while accelerating the delivery of essential services and infrastructure.

Sector-Specific Opportunities : In addition to agriculture, tourism, and infrastructure, sectors such as renewable energy and technology are gaining traction. Angola’s abundant natural resources offer opportunities for solar and wind energy projects, while the burgeoning tech ecosystem presents prospects for innovation and digital transformation.

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SPEDU’s Economic Revitalization: The Role of BOBS in Botswana’s Diversification Efforts

The Southern African region, and Botswana in particular, has long relied on its rich mineral resources, especially diamonds, to drive economic growth. However, recognizing the vulnerabilities associated with this reliance on mining, the Sedibeng Economic Diversification Unit (SPEDU) is actively working to revitalize its economy by transitioning towards a more diversified economic base. This initiative encompasses key sectors such as tourism, manufacturing, agri-business, and information and communication technology (ICT). A vital partner in this transformation is the Botswana Bureau of Standards (BOBS), which plays a crucial role in setting and maintaining quality standards that are essential for supporting SPEDU’s objectives of industrialization, job creation, and economic sustainability.

SPEDU’s Vision for Economic Diversification

SPEDU was established with the goal of fostering economic growth through diversification, moving away from a singular dependence on mining. The agency aims to cultivate new sectors that can create jobs and stimulate economic activity.

• Tourism : With its breathtaking landscapes, rich cultural heritage, and diverse wildlife, Botswana has immense potential in the tourism sector. SPEDU is working to enhance tourism infrastructure and promote sustainable tourism practices that can attract both local and international visitors.
• Manufacturing : By promoting local manufacturing, SPEDU seeks to reduce dependency on imported goods. This involves supporting small and medium-sized enterprises (SMEs) in developing manufacturing capabilities that can serve both domestic and regional markets.
• Agri-business : Agriculture remains a crucial sector for Botswana’s economy. SPEDU is focused on enhancing agricultural productivity through modern farming techniques, agro-processing, and value addition, thereby creating jobs and improving food security.
• ICT : The digital economy is rapidly growing, and SPEDU recognizes the importance of ICT in driving innovation and economic growth. Initiatives to foster ICT development aim to improve connectivity and provide training for a digitally skilled workforce.

The Role of BOBS in Quality Assurance

As Botswana transitions towards these diversified sectors, maintaining high standards of quality is paramount. The Botswana Bureau of Standards (BOBS) plays an essential role in this process by developing and implementing standards that ensure the quality and safety of products and services across various industries.

Setting Industry Standards

BOBS works to create standards that align with international best practices, ensuring that Botswana’s products are competitive in both local and global markets. This involves:

• Developing Standards : BOBS collaborates with industry stakeholders to establish relevant quality standards for new sectors, including tourism services, manufactured goods, and agri-products.
• Certification : The bureau provides certification services for businesses that meet established standards, enhancing their credibility and marketability. This is especially important for the agri-business sector, where quality assurance is vital for accessing both domestic and export markets.

Promoting Compliance and Quality Control

In addition to setting standards, BOBS also focuses on promoting compliance through:

• Training and Support : BOBS offers training programs to help businesses understand and implement quality standards. This capacity-building initiative is critical for SMEs in manufacturing and agri-business sectors, equipping them with the knowledge to maintain quality and competitiveness.
• Testing and Inspection Services : The bureau conducts testing and inspection of products to ensure compliance with established standards. This quality assurance mechanism helps build consumer confidence in local products and services.

Contributing to SPEDU’s Goals

The efforts of BOBS in quality assurance directly contribute to SPEDU’s overarching goals of industrialization, job creation, and economic sustainability. By ensuring that products and services meet high-quality standards, BOBS enhances the potential for local businesses to thrive in diversified sectors.

• Industrialization : Quality standards support the establishment of robust manufacturing processes, leading to increased production capacity and the establishment of industries that contribute to economic growth.
• Job Creation : As new sectors develop and existing industries improve their standards, job opportunities will emerge, contributing to economic stability and reducing unemployment rates.
• Economic Sustainability : By promoting quality and competitiveness, BOBS helps create a sustainable economic environment that can withstand global market fluctuations, reducing the country’s reliance on mining.

SPEDU’s initiative to revitalize Botswana’s economy through diversification is a crucial step towards sustainable growth and development. The role of the Botswana Bureau of Standards in establishing and maintaining quality standards cannot be overstated. By ensuring that products and services meet rigorous quality requirements, BOBS not only supports SPEDU’s goals of industrialization and job creation but also paves the way for a resilient economy capable of thriving in a rapidly changing global landscape. Through collaboration and commitment to quality, Botswana is poised to successfully transition from a mining-dependent economy to a diversified and sustainable economic powerhouse.

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Turkey’s Economic and Financial Viability Relies on the West Despite Attempts at Diversification

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Documents Referenced in this article are available in the original Nordic Monitor version.

Trade, investment and technology continue to be the West’s most significant leverage over Turkey, whose economy cannot be sustained without tens of billions of dollars flowing into its coffers.

According to a report prepared by the Ministry of Trade, Turkey’s trade with Europe and North America remains a lifeline for its economy. This is despite decades-long diversification efforts by the government of President Recep Tayyip Erdoğan, which has increasingly sought closer ties with Iran, Russia and China, often at the expense of its NATO allies.

In 2023, 41 percent of Turkey’s exports went to the 27 member states of the European Union, amounting to $104.3 billion out of a total export volume of $255.8 billion for that year. When including other European countries and North America, the total reaches $160.6 billion, or 62.8 percent overall.

In 2023, 41 percent of Turkey’s exports went to the 27 member states of the European Union, amounting to $104.3 billion out of a total export volume of $255.8 billion for that year.

The figures also indicate that the trade is largely balanced, meaning that Turkey imports relatively the same amount it exports to these countries. In 2023 Turkey’s imports from the EU stood at $106 billion, nearly the same amount as its exports to the bloc. Turkey had a positive trade balance of approximately $10 billion in 2022. Turkey exported slightly more than it imported from North American countries last year.

Germany was the top export destination for Turkish products last year, with $21.1 billion, representing an 8.2 percent share of the total. It was followed by the US with $14.8 billion. Among the top 10 export destinations, seven were from the Western bloc, with the remaining destinations being Russia, Iraq and the United Arab Emirates.

In the January-June period this year, Turkey’s exports to Europe were recorded at $71.8 billion, representing 57.2 percent of overall Turkish exports. This marks a slight increase compared to the same period last year.

In sharp contrast Turkey’s trade with Russia and China had a significantly negative balance for Turkey last year, exacerbating its current account deficit. While Turkish exports to Russia amounted to $10.9 billion (4.3 percent of total exports), its imports from Russia stood at $45.6 billion (12.6 percent). In other words, Turkey spent more than three times as much financing the Russian economy than it received from it.

A similar pattern is evident in Turkey’s trade with China, which was the second-largest source of imports for Turkey after Russia, amounting to $45 billion. China is not even among the top 10 export destinations for Turkish products, resulting in a substantial negative trade balance for Turkey.

In terms of service sector exports such as tourism, logistics and transportation, Western countries remain crucial for Turkey as well. Last year 6.6 million people from Europe visited Turkey as tourists, accounting for 49.8 percent of the total, contributing to half of the $54.3 billion Turkey earned from tourism. The number of visitors from the US was 372,000, representing 2.47 percent of the total.

China is not even among the top 10 export destinations for Turkish products, resulting in a substantial negative trade balance for Turkey.

Understandably, there was a dramatic increase in Russian visitors choosing to travel to Turkey in 2022 and 2023, with 1.8 million tourists annually. In 2021 the number stood at 854,000. This surge was largely attributed to Western sanctions on Russia, which created difficulties in accessing financial and banking services in Western countries. Consequently, Russians opted for Turkey, which publicly declared it would not enforce Western sanctions and would facilitate Russians’ access to Turkish banking and financial institutions.

Regarding foreign direct investment (FDI) in Turkey, the West retains the majority of investment inflows, underscoring its critical role in supporting the Turkish economy. According to the latest data, Europe alone accounted for 69.6 percent of the FDI into the country, amounting to nearly $4 billion last year. The US held 4.6 percent of the investment share. By April 2024 European investment decreased slightly to 65.4 percent, while US investment surged to 20.9 percent of the overall FDI.

Between 2002 and 2024, spanning a little over two decades of President Erdoğan’s rule in Turkey, investments originating from Europe amounted to $136.4 billion. US investors contributed $15 billion to the Turkish economy during the same period. When considering indirect investment and the broader economic benefits derived from relations with the West, Turkey remains heavily dependent on Western support for the viability of its economy.

Furthermore, Europe and North America have been key markets for the Turkish manufacturing industry, which relies on imported intermediate goods, chemicals and high-end precision machinery to produce goods for export to the rest of the world.

The figures clearly show that Erdoğan’s efforts to get closer to Russia, Iran and China over the last decade have not achieved the intended diversification in trade that would replace the crucial support provided by the West. It seems this pattern will continue into the foreseeable future unless significant changes occur.

Erdoğan is often criticized for his confrontational rhetoric towards the West, but in practice, he has little choice but to align with Western positions on most, if not all, issues.

This was the main reason why Erdoğan had to roll back unorthodox economic and financial policies and return to conventional macroeconomic policies last year. However, his initial stance came at a high cost, with losses amounting to tens of billions of dollars, and by some accounts, possibly hundreds of billions. This resulted in high inflation, soaring unemployment and a wider current account deficit.

Erdoğan is often criticized for his confrontational rhetoric towards the West, but in practice, he has little choice but to align with Western positions on most, if not all, issues. This was evident at the recent NATO leaders’ summit in Washington, D.C. He understands that his political survival hinges on delivering for the Turkish people, and to achieve that, he relies heavily on Western trade, tourism, investment and technology.

Nevertheless, this bitter truth does not deter him from seizing opportunities when they arise, such as facilitating sanction-busting tactics for Russians and Iranians, and allowing the Chinese to establish a strong foothold in the Turkish economy in exchange for undisclosed agreements that enrich himself and his associates, often at the expense of Turkey’s national interests.

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What gets anglers hooked on fishing in the Snake River headwaters?

Published August 30, 2024 By DeeDee DuPlessis

Master's thesis aims to understand the impact of changing climate to fishing tourism in northwestern Wyoming counties 

Which angling trip to the Snake River would you rather take: One that is cheaper than your last one, but you have to deal with wildfire smoke, or a more expensive one with no smoke and clear scenic views? Or would you rather stay at home, given these circumstances?

These are the kind of questions that Patrick Hofstedt asked anglers as part of his master’s thesis in agricultural and applied economics, analyzing “The preferences of anglers under alternative climate scenarios in northwestern Wyoming.”

Angling – fishing with a hook and a line – is an important contributor to Wyoming’s economy and a popular activity in Teton County around Jackson. In 2015, nearly 50 thousand fishing licenses were sold in the county, contributing to the over a billion dollars travelers spend in the county annually. Changes to angling across the Snake River with climate change over the coming decades therefore are of interest to the county and state as a whole.

Patrick Hofstedt earned his BA in Environmental Studies from Washington and Lee University in Virginia. He became interested in regenerative agriculture and the economics behind it. Although he claims to have applied to UW “on a whim,” he knew he wanted to experience the American West. Before he started the program in Laramie, he spent a season with the Forest Service at a popular fishing/rafting area in Idaho. This, coupled with previous experience in water sports, led to a shift in emphasis and becoming part of the WyACT project.

Gauging effects of different climate scenarios on fish and the environment

Patrick was able to draw on previous WyACT research. His survey was informed by the three climate scenarios that post-doc Anderson de Figueiredo has developed for the region and applied them to fish population and the environment.

The first scenario projects less snow and more heat days that will impact the stream temperatures in the summer peak angling season. Fish species that benefit from these conditions could outcompete the coveted Yellowstone cutthroat trout and other native fish.

The second scenario suggests that smoke from more frequent wildfires across the American West would worsen air quality and obscure the scenic views that attract visitors. The final scenario foresees the area becoming even more attractive to visitors who want to experience the Western United States, as other areas become unpleasantly hot. This increased tourism might put more stress on resources and lead to infrastructure changes.

With the aid of focus groups and individual anglers, Patrick created a survey that can help anticipate anglers’ reactions to these scenarios. The survey was then distributed by WYSAC, the Wyoming Survey & Analysis Center at the University of Wyoming, to buyers of fishing license purchasers in previous years Park, Teton, and Sublette County. Patrick reviewed over 330 replies from people who had fished in these counties over the past year. The typical respondent was from out of state, male and in his mid-50s and considered himself a slightly above average angler. Only one out of five anglers were on a guided trip.

Seeking solitude or easy access

Anglers are not a homogeneous crowd. Patrick discovered two groups: “On the basis of the survey results, I created two groups that I named ‘Nature Lovers’ and ‘Friendly Neighbors’ after their most salient characteristics.” Nature Lovers seek solitude and a natural experience, trying to avoid other anglers and wildfire smoke. The majority are residents of other states. The “Friendly Neighbors” tend to be Wyoming residents, and they value the ease of access to fishing spots. They are less bothered by other anglers.

Across both groups, wildfire smoke and lack of clear views were major deterrents. Seven percent of anglers would cancel their plans, leading to a loss of $6.5m in spending. A close second is easier access to angling spots that would result in more anglers. It came as a surprise that this would cause even more anglers to forego the trip than a change in fish species prevalence. Patrick: “If more tourists visit the area, and more infrastructure is built to accommodate them, it will become more likely that you have to share your spot with others.” And that is a no-go, especially for the Nature Lovers. They would rather deal with more difficult access to their fishing spots if that means fewer anglers. This is an important consideration for the planners in the area when thinking about adding infrastructure.

Nature lovers also place much more importance on Yellowstone cutthroat trout. Patrick: “Catching this popular native species is important to their experience, whereas for the friendly neighbors, whichever fish they caught was less important to them.” Overall, the Nature Lovers group is predicted to react stronger to any kind of change impacting their experience, opting out of a trip entirely to go somewhere else. Patrick: “They know what they want and are less likely to compromise.” In line with this attitude, they are also less likely to substitute a rafting trip as an alternative experience.

A summary of the thesis results is planned to be published in an Extension Bulletin and presented at events around Jackson.

A future in water topics

Patrick is hooked on watery themes: He is just starting his PhD in the Hydrologic Sciences program, and considers expanding his scope to other regions or water-based activities. His adviser Kristi Hansen points out: “As one of the first two social sciences students to be enrolled in the program, Patrick embodies the interdisciplinary approach that characterizes WyACT.” Patrick will continue to be part of WyACT for the reminder of the project.

Patrick Hofstedt

CEAS Announces the 2024 Asada Eiji B.A. Thesis Prize Winners

The University of Chicago Center for East Asian Studies sponsors an annual prize of $250 awarded for the best University of Chicago B.A. thesis dealing with topics related to East Asia (China, Japan and Korea).  Since its inception in 2009, one prize has been awarded to a paper in the area of humanities and one in the area of social sciences.  Preference is provided to papers utilizing original source materials in an East Asian language.  This prize is name in honor of Asada Eiji , the recipient of the first Ph.D. degree awarded by the University of Chicago in 1893.  Professor Asada went on to enjoy an illustrious career at the Tokyo University of Foreign Studies.

The Center for East Asian Studies is pleased to announce the winners of the 2024 Asada Eiji B.A. Thesis Prize:

Aaron Yike Huang , East Asian Languages and Civilizations and Music "The Making of Courtly Opera: Vernacular Music Reforms in the Qianlong Court, 1736-1746" Aaron will be attending the University of Hamburg to study for a Master of Arts degree in Indology and Tibetology.  

SOCIAL SCIENCES

Chenjie Song , Sociology and Political Science "Talking Politics: China's Zero-COVID Era and the Middle-Class Political Consciousness" Chenjie plans to take a gap year to travel, continue learning languages, and hopes to work in the development field in the future.

For more information, please review the resources available at CEAS Undergraduate Student Funding Opportunities . 

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My Top 10 High Dividend Yield Companies For September 2024: One Yields Above 9%

• Identifying companies that pay sustainable dividends is crucial for generating an annually increasing dividend income, as well as enhancing the likelihood of successful investment outcomes.
• Today, I will present you with 10 high dividend yield companies that, I believe, are attractive choices and worth considering investing in during this month of September 2024.
• Each company can significantly contribute to your portfolio’s income generation, has recently shown dividend growth, has a relatively low Valuation, is financially robust, and holds a well-established competitive position.

Investment Thesis

Have you ever invested in a high dividend yield company, attracted by its high yield, yet the result was a dividend reduction and poor stock performance?

When selecting such high dividend yield companies, it is crucial to evaluate several factors to ensure the dividend is sustainable. A sustainable dividend is a key factor when gauging a company’s ability to constantly raise its dividend over time.

To identify if a dividend is sustainable, factors such as the Payout Ratio, EPS Growth Rate, 5-Year Dividend Growth Rate, the Consecutive Years of Dividend Growth, and the companies’ competitive advantages and balance sheet should be evaluated carefully. These metrics can help us to increase the likelihood that the selected companies we invest in pay sustainable dividends. In turn, this allows us to constantly increase our wealth over the long term and with a reduced risk level.

When taking a closer look at your investment portfolio, do you think that the majority of the companies there pay sustainable dividends?

In this article, I will present you with 10 high dividend yield companies which I currently consider to be attractive choices for investors. This is due to their competitive position within their industries, financial robustness, relatively low Valuation, and their ability to increase the dividend over the long term.

Before I present you with the 10 selected high dividend yield companies to consider investing in during September 2024, I would like to describe the selection process in greater detail.

Since I have already described the detailed selection process of high dividend yield companies in a previous article , you can skip the following section written in italics, if you are already familiar with it.

First step of the Selection Process: Analysis of the Financial Ratios

In order to identify companies with a relatively high Dividend Yield [FWD], I use a filter process to make a pre-selection. From this pre-selection, I will later choose my top 10 high Dividend Yield companies of the month. To be part of this pre-selection of high Dividend Yield stocks, the companies should fulfill the following requirements:

• Market Capitalization > $10B
• Dividend Yield [FWD] > 2.5%
• P/E [FWD] Ratio or P/AFFO [FWD] < 30

In the following, I would like to specify why I have chosen the metrics mentioned above in order to select my top 10 high Dividend Yield stocks of the month.

A Market Capitalization of more than $10B contributes to the fact that the risks attached to your investments are lower, since companies with a higher Market Capitalization tend to have a lower volatility than companies with a low Market Capitalization.

A P/E [FWD] Ratio of less than 30 implies that the price you pay for the company is not extraordinarily high, thus filtering out those that have stock prices in which high growth expectations are priced in. High growth expectations imply strong risks for investors since the stock price could drop significantly. Again, the filtering process helps us to reduce the risk so that we are more likely to make an excellent investment decision.

Second step of the selection process: Analysis of the Competitive Advantages

In a second step, the companies’ competitive advantages (for example: brand image, innovation, technology, economies of scale, etc.) are analyzed in order to make an even narrower selection. I consider it to be particularly important for companies to have strong competitive advantages in order to stand out against the competition in the long term. Companies without strong competitive advantages have a higher probability of going bankrupt one day, thus representing a strong risk for investors to lose their invested money.

Third step of the selection process: The Valuation of the companies

In the third step of the selection process, I will dive deeper into the Valuation of the companies.

In order to conduct the Valuation process, I use different methods and criteria, for example, the companies’ current Valuation as according to my DCF Model, the expected compound annual rate of return as according to my DCF Model and/or a deeper analysis of the companies’ P/E [FWD] Ratio. These metrics should serve as an additional filter to only select companies that currently have an attractive Valuation, which helps you to identify companies that are at least fairly valued.

The Fourth and final step of the selection process: Diversification over Industries and Countries

In the fourth and final step of the selection process, I have established the following rules for choosing my top picks: in order to help you diversify your investment portfolio, a maximum of two companies should be from the same industry. In addition to that, there should be at least one pick that is from a company that is based outside of the United States, serving as an additional geographical diversification.

My Top 10 High Dividend Yield Companies to Consider Investing in for September 2024

• Ares Capital (NASDAQ: ARCC )
• Banco Santander (NYSE: SAN )
• BB Seguridade Participações S.A. ( OTCPK:BBSEY )
• Chevron (NYSE: CVX )
• Diageo (NYSE: DEO ) ( OTCPK:DGEAF )
• Realty Income (NYSE: O )
• Rio Tinto (NYSE: RIO )
• The Bank of Nova Scotia (NYSE: BNS )
• United Parcel Service (NYSE: UPS )
• Verizon (NYSE: VZ )

Within the past 12-month period, Diageo has significantly underperformed the S&P 500 (NYSEARCA: VOO ). This is evidenced by the company’s Total Return of -19.57% compared to the 26.14% of the S&P 500.

Source: Seeking Alpha

This underperformance is one of the reasons why Diageo presently has an attractive Valuation and has made it into this list of high dividend yield companies to consider investing in during this month of September.

Diageo’s P/E [FWD] Ratio of 20.29 is 14.24% below its 5-year average, suggesting that the company is undervalued. This undervaluation is also evidenced by a Dividend Yield [TTM] of 3.02%, which is significantly above its 5-year average of 2.27%.

Diageo’s excellent position within the Distillers and Vintners Industry and its financial health are underlined by an EBIT Margin [TTM] of 29.59% and a Return on Equity of 38.92%.

Today, Diageo pays shareholders a Dividend Yield [FWD] of 3.11%, indicating its ability to produce significant dividend income for your investment portfolio. The company has shown a 5-Year Dividend Growth Rate [CAGR] of 2.81%, which underscores its modest dividend growth potential.

Banco Santander

The Madrid-based bank Banco Santander with a current Market Capitalization of $76.89B operates through the following segments :

• Retail Banking
• Santander Corporate & Investment Banking
• Wealth Management & Insurance
• and Pagonxt.

Banco Santander presently offers shareholders a Dividend Yield [FWD] of 3.77%. The bank’s low Dividend Payout Ratio [TTM] [Non GAAP] of 24.17% offers investors significant room for dividend enhancements in the years ahead.

Consensus Dividend Estimates confirm that Banco Santander is an attractive pick for those investors aiming to blend dividend income and dividend growth. The Consensus Yield for 2024 stands at 4.54%, while it is at 5.28% for 2025, and 5.59% for 2026. This shows that the Spanish bank is an attractive choice for dividend income and dividend growth-focused investors.

In addition to that, it is worth highlighting that Banco Santander presently has an attractive Valuation: its P/E [FWD] Ratio of 7.37 stands 40.18% below the Sector Median, a signal of the bank’s undervaluation.

BB Seguridade Participações S.A.

BB Seguridade Participações S.A. is a subsidiary of Banco do Brasil S.A. ( OTCPK:BDORY ). The company operates within the Multi-line Insurance Industry and is based in Brasília, Brazil.

BB Seguridade Participações S.A. presently pays its shareholders a Dividend Yield [FWD] of 7.54%. In addition to that, the company has shown a 10-Year Dividend Growth Rate [CAGR] of 6.17%.

These numbers indicate that you can effectively blend dividend income and dividend growth through an investment in the company. This makes it an attractive candidate for potential inclusion into The Dividend Income Accelerator Portfolio. BB Seguridade Participações S.A. is already on my watchlist for closer observation.

In addition to its attractive Dividend Yield, I am convinced that the company presently has an attractive Valuation, which has been important in my decision to add it to this list of high dividend yield companies, ensuring that you can invest with a margin of safety. BB Seguridade Participações S.A.’s current P/E [FWD] Ratio stands at 8.40, which is 31.85% below the Sector Median.

However, due to the currency risk, I suggest setting an allocation limit of 2.5%.

Considering the past 5 years, the S&P 500 has significantly outperformed Chevron. While the S&P 500’s Total Return has been +93.64%, Chevron’s Total Return has been +55.58% in the same period.

Today, Chevron pays a Dividend Yield [FWD] of 4.47%. At the same time, it is worth highlighting the company’s 5-Year Dividend Growth Rate [CAGR] of 6.41% and its relatively low Payout Ratio of 52.42%. For these reasons, I am convinced that Chevron is an excellent choice for investors aiming to blend dividend income and dividend growth.

In addition, Chevron’s fair valuation can be highlighted. At this moment in time, the company exhibits a P/E [FWD] Ratio of 13.11, which is in line with the Sector Median of 12.63.

The Bank of Nova Scotia

The Bank of Nova Scotia offers investors an attractive mix of a relatively low Valuation (P/E [FWD] Ratio of 10.56, which stands below the Sector Median of 12.33, indicating that the bank is presently undervalued), an attractive Dividend Yield [FWD] of 6.43%, a Payout Ratio of 67.52% (which indicates scope for future dividend enhancements), and a 5-Year Dividend Growth Rate [CAGR] of 3.76%.

These metrics have increased my confidence to not only add The Bank of Nova Scotia to my watchlist for potential inclusion within The Dividend Income Accelerator Portfolio, but also to include it on this list of high dividend yield companies to consider investing in during this month of September 2024.

Compared to U.S. banks such as Bank of America (NYSE: BAC ), Citigroup (NYSE: C ) and JPMorgan (NYSE: JPM ), The Bank of Nova Scotia not only pays a significantly higher Dividend Yield but also has a significantly lower Valuation.

The Bank of Nova Scotia’s Dividend Yield [FWD] of 6.43% lies significantly above Bank of America’s Dividend Yield [FWD] of 2.60%, JPMorgan’s 2.08% and Citigroup’s 3.64%.

Additionally, The Bank of Nova Scotia’s P/E [FWD] Ratio of 10.56 is lower than Bank of America’s 12.25, JPMorgan’s 12.38, and Citigroup’s 10.75, indicating that The Bank of Nova Scotia is the most attractive choice in terms of Valuation among these four banks.

However, JPMorgan, Bank of America, and Citigroup’s significantly lower Payout Ratios of 24.54%, 33.80%, and 37.29% respectively should be noted, when compared to The Bank of Nova Scotia’s 67.52%. These numbers indicate that the U.S. banks carry a lower risk of a dividend reduction and a reduced overall risk level when compared to The Bank of Nova Scotia.

While Bank of America presently represents 2.58% of The Dividend Income Accelerator Portfolio, JPMorgan currently accounts for 1.82%. Due to their attractive risk-reward profile, I plan to overweight both U.S. banks within our dividend portfolio.

Rio Tinto, with a current Market Capitalization of $106.39B, explores and processes mineral resources on a worldwide basis.

At the company’s current share price of $63.13, Rio Tinto pays a Dividend Yield [FWD] of 6.90%. This makes it an attractive choice for dividend-income focused investors.

Furthermore, it is worth highlighting the company’s 10-Year Dividend Growth Rate [CAGR] of 7.95%, which makes it an attractive investment choice when aiming to combine dividend income and dividend growth. This has also been the reason for which I have added Rio Tinto to my watchlist for potential inclusion within our dividend portfolio.

A low P/E [FWD] Ratio of 8.45, which is 55.45% below the Sector Median, has increased my confidence to add Rio Tinto to this list of high dividend yield companies to consider investing in for September 2024.

Below, you can find a projection of Rio Tinto’s Dividend and Yield on Cost when assuming an Average Dividend Growth Rate of 4% (a conservative assumption based on the company’s 5-Year Dividend Growth Rate [CAGR] of 5.62%). Assuming these growth rates, you could potentially reach a Yield on Cost of 10.17% in 2034, 15.05% in 2044, and 22.28% in 2054.

Source: The Author

United Parcel Service

Within the past 12-month period, UPS has significantly underperformed when compared to the S&P 500. While UPS’ Total Return has been -21.08%, the performance of the S&P 500 has been significantly superior (26.14%).

The result of UPS’ underperformance is the company’s relatively low Valuation. Today, UPS has a P/E GAAP [FWD] Ratio of 17.61, which stands 21.76% below the Sector Median, reflecting that the company is presently undervalued.

At its current price level of $127.32, UPS pays a Dividend Yield [FWD] of 5.13%, which makes it an attractive choice for dividend income investors.

However, it should be highlighted that UPS’ current Payout Ratio of 89.67% stands at a high level. This strengthens my opinion to underweight the company in a dividend portfolio, not allocating more than 2% to it. This approach means that a possible dividend reduction would only have a limited negative impact on the Total Return of our investment portfolio.

Realty Income

Realty Income has also made it into this list of high dividend yield companies to consider investing in during this month of September 2024. This is thanks to the company’s currently attractive Dividend Yield [FWD] of 5.09%, its AFFO Payout Ratio [FWD] of 74.56%, in addition to its 3-Year Dividend Growth Rate [CAGR] of 4.33%. All of these metrics indicate Realty Income’s attractiveness for those investors aiming to combine dividend income and dividend growth, and for those looking for companies that pay a sustainable dividend.

In addition, it can be highlighted that Realty Income is presently a buy as according to the Seeking Alpha Quant Rating. Furthermore, the company has an attractive rating as according to the Seeking Alpha Factor Grades, in which it gets an A+ for Growth, and an A for Profitability. Both ratings underline my own buy rating for Realty Income.

At Verizon’s current stock price of $41.21, the company offers investors a Dividend Yield [FWD] of 6.41%. With a P/E [FWD] Ratio of 9.35, the company also has an attractive Valuation. Its current P/E [FWD] Ratio stands 47.96% below the Sector Median, reflecting Verizon’s undervaluation.

Below, you can find Consensus Dividend Estimates for Verizon, which underline its suitability for dividend income investors. For 2024, its Consensus Dividend Yield stands at 6.45%, for 2025, it's at 6.57%, and for 2026, it's at 6.70%.

Compared to competitor AT&T (NYSE: T ), Verizon presently pays a higher Dividend Yield (6.41% compared to 5.60%), has shown more dividend growth in recent years (5-Year Dividend Growth Rate [CAGR] of 1.99% compared to AT&T’s -6.25%), and has the lower Valuation (P/E [FWD] Ratio of 9.35 compared to AT&T’s 9.83). These metrics make Verizon the superior choice at this moment in time, especially for dividend income oriented investors.

Ares Capital

With a current Dividend Yield [FWD] of 9.16%, Ares Capital is a strong choice for dividend income oriented investors. With such a high Dividend Yield, I believe that the company can be an important strategic element for a dividend income focused portfolio, to help raise the portfolio’s Weighted Average Dividend Yield. For this reason, I have also incorporated Ares Capital into The Dividend Income Accelerator Portfolio, in which the company currently represents 3.48% of the overall portfolio.

The company has shown 19 Consecutive Years of Dividend Payments, which underlines its capacity to contribute to the portfolio’s income generation.

The Seeking Alpha Dividend Grades, which you can find below, further underscores my investment thesis that Ares Capital is an excellent choice for dividend investors. For Dividend Growth, the company receives an A+ rating, and an A for Dividend Yield.

Balancing Dividend Income and Dividend Growth Within Your Portfolio

After identifying those high dividend yield companies that pay sustainable dividends, I believe it is crucial to include them in a well-balanced dividend portfolio which not only consists of high dividend yield companies, but also companies with a strong dividend growth focus, as this approach can bring you the most benefits.

Balancing within your investment portfolio companies that pay an attractive dividend yield with those that have strong dividend growth potential is an excellent strategy that allows you to generate steadily increasing extra income through dividend payments. At the same time, it allows you to strive for capital appreciation, driven by the strong dividend growth potential of the selected companies. Such an approach is also utilized and implemented by The Dividend Income Accelerator Portfolio.

The Dividend Income Accelerator Portfolio

The Dividend Income Accelerator Portfolio’s objective is the generation of income via dividend payments, and to annually raise this sum. In addition to that, its goal is to attain an appealing Total Return when investing with a reduced risk level over the long term.

The Dividend Income Accelerator Portfolio’s reduced risk level will be reached due to the portfolio’s broad diversification over sectors and industries and the inclusion of companies with a low Beta Factor.

Below, you can find the characteristics of The Dividend Income Accelerator Portfolio:

• Attractive Weighted Average Dividend Yield [TTM]
• Attractive Weighted Average Dividend Growth Rate [CAGR] 5 Year
• Relatively low Volatility
• Relatively low Risk-Level
• Attractive expected reward in the form of the expected compound annual rate of return
• Diversification over asset classes
• Diversification over sectors
• Diversification over industries
• Diversification over countries
• Buy-and-Hold suitability

Today , The Dividend Income Accelerator Portfolio offers investors a Weighted Average Dividend Yield [FWD] of 4.20%, and a 5-Year Weighted Average Dividend Growth Rate [CAGR] of 7.31%, strategically integrating both dividend income and dividend growth, and helping investors to constantly increase their wealth while investing with a reduced risk-level.

An extraordinarily high dividend yield of a company can be an indicator of a possible dividend reduction in the future, and therefore can also be a sign of a possible weak stock performance. A weak stock performance is often the result of a dividend reduction.

For this reason, a careful selection process of high dividend yield companies is essential when aiming to incorporate companies with a high capacity to produce dividend income.

Such a careful selection process will allow us to identify companies that pay sustainable dividends, allowing us to increase our wealth steadily over time.

Each of the high dividend yield companies I have presented in today’s article can be a strategically important position for your dividend portfolio, enhancing its capacity to generate a sustainable dividend income.

Each pick pays an attractive Dividend Yield, has potential for dividend growth, a currently attractive Valuation, and competitive advantages that ensure it should be able to stand out against competitors over the long term, thus allowing us to protect our invested capital.

The well-balanced mix of high dividend yield companies and dividend growth companies is one of the main characteristics of The Dividend Income Accelerator Portfolio, which effectively blends high dividend yield companies (such as those presented in today’s article) with companies that focus on dividend growth.

When selecting both high dividend yield companies and dividend growth companies for our dividend portfolio, I focus on identifying those that pay sustainable dividends.

The implementation of such a strategic and well-balanced investment approach with companies that pay sustainable dividends offers investors the capacity to annually increase their dividend income significantly while investing with a reduced risk level and with elevated chances for successful investment outcomes. Such an approach also allows you to not only focus on dividend payments but also on capital appreciation.

Author’s Note: Feel free to share any feedback on my selection of high dividend yield companies to consider investing in September 2024. What are your favorite high dividend yield companies for September 2024?

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

This article was written by

Analyst’s Disclosure: I/we have a beneficial long position in the shares of ARCC, SAN, CVX, O, RIO, VZ, JPM, BAC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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International stocks appear cheap relative to u.s stocks. 3 reasons investors should invest cautiously overseas..

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Planet Earth Night Lights

When assessing investment opportunities, one crucial consideration is the relative valuation of domestic and international equities. A commonly employed metric, the price-to-earnings ratio, serves as a barometer for gauging the relative expensiveness or cheapness of stocks. An analysis of the Vanguard Total Stock Market ETF Vanguard Total Stock Market ETF , a proxy for the total U.S. stock market, reveals a lofty P/E ratio of 25.66, substantially higher than its 10-year average of 18.47. Conversely, the MSCI EAFE ETF iShares MSCI EAFE ETF , representing international developed markets, exhibits a more modest P/E ratio of 17.14.

At first glance, this disparity in valuations might suggest that international stocks present a compelling value proposition for investors seeking better growth opportunities. However, a deeper examination of historical trends and underlying economic factors reveals a more nuanced picture.

While the current P/E ratio for U.S. stocks appears elevated relative to its historical average, international equities have consistently traded at a discount compared to their domestic counterparts. Over the past decade, the average P/E ratio for international stocks stands at 14.33, markedly lower than the U.S. average of 18.47. This persistent valuation gap can be attributed to several structural factors that have shaped the divergence between the two markets.

The Evolving U.S. Economic Landscape

The U.S. economy has undergone a transformative shift over the past decade, transitioning from a manufacturing and energy-driven economy to one dominated by the technology sector. This secular change has propelled the growth of innovative, disruptive companies that command premium valuations in the market. As the global leader in technological advancements, the U.S. is home to the world's largest and fastest-growing technology firms, which have significantly contributed to the elevated valuations observed in domestic equities.

In contrast, international market indices often comprise a more diverse array of companies, many of which operate in traditional, slower-growing sectors. This composition inherently translates into lower average growth rates and, consequently, more modest valuations compared to the U.S. market.

Best High-Yield Savings Accounts Of 2024

Best 5% interest savings accounts of 2024.

Another factor influencing the valuation differential is the relative strength of the U.S. dollar against other major currencies. Over the past decade, the dollar has appreciated, rendering the earnings of international companies less valuable when converted into U.S. dollars. This currency dynamic has further exacerbated the pricing gap between domestic and international equities from the perspective of U.S. investors.

Monetary Policy Divergence

The U.S. Federal Reserve's proactive approach to managing economic cycles and mitigating systemic risks has fostered a perception of stability and resilience in domestic markets. Since the Global Financial Crisis, the Fed has expanded its toolkit and demonstrated a willingness to intervene aggressively to insulate the economy and financial markets from significant shocks.

In contrast, international central banks have not always exhibited the same level of responsiveness or policy coordination, contributing to a heightened sense of risk associated with international markets. This perceived risk premium has manifested in the form of lower valuations for international equities relative to their U.S. counterparts.

The Case For International Diversification

While the structural factors outlined above suggest that the U.S. stock market may continue to command a valuation premium, an allocation to international equities can still offer valuable benefits to investors.

International markets are influenced by economic cycles and dynamics that operate independently from the U.S. economy. By incorporating international stocks into a portfolio, investors can achieve greater diversification and potentially reduce overall portfolio risk. This diversification can help smooth returns and reduce volatility, as international equities may respond differently to global economic events than domestic stocks.

While the U.S. market has been a leader in technological innovation, emerging markets and developing economies may present compelling growth prospects in various sectors. By investing in international equities, investors can gain exposure to these potential growth opportunities, which may not be fully represented in domestic indices.

Navigating The Value Vs. Growth Dilemma

While international stocks may appear attractively valued relative to their U.S. counterparts, relying solely on valuation metrics as a basis for investment decisions can be misleading. The structural factors underpinning the persistent valuation gap between domestic and international equities suggest that the U.S. market's premium may be justified by its leadership in innovation, growth, and economic resilience.

Investors seeking to capitalize on potential value opportunities in international markets should exercise caution and adopt a holistic approach that considers not only valuation metrics but also factors such as economic fundamentals, geopolitical risks, and currency dynamics. Additionally, maintaining a well-diversified portfolio that includes both domestic and international equities can help mitigate risks and potentially enhance overall returns.

The debate surrounding the relative attractiveness of value versus growth in international markets is a complex one, with no simple answers. While valuation metrics may suggest that international stocks offer better value, the structural factors underpinning the persistent valuation gap between domestic and international equities should not be overlooked.

Ultimately, investors must carefully evaluate their investment objectives, risk tolerance, and time horizons to determine the appropriate allocation between domestic and international equities. A well-diversified portfolio that balances exposure to both markets may be the most prudent approach, allowing investors to benefit from the strengths of each while mitigating potential risks.

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