News of a 2.5% domestic expansion has U.S. homebuilder stocks such as Toll Brothers (TOL, quote) and Ryland Homes (RYL, quote) rebounding, but growth of 9.1% in China has Xinyuan Real Estate Co. (XIN, quote) up a scant 2% for the month.
The exchange-traded fund for home builders (XHB, quote) has climbed almost 20% for the month while the Chinese real estate fund (TAO, quote) has gained 24%.
Xinyuan Real Estate Co offers low-cost exposure to the rising consumer class in China. While growth is slowing there too, China is still the country that saves the most, invests the most and has, by far, more foreign reserves than anyone else.
This can only result in more homes being sold as private property rights become very important as the country becomes more affluent.
Now trading around $1.80 a share, Xinyuan has many appealing features. Unlike U.S. homebuilders such as Toll Brothers and Ryland Group, Xinyuan has little debt.
Again, unlike many U.S. homebuilders, sales and earnings for Xinyuan on a quarter-by-quarter basis are booming: up more than 90% and more than 220%, respectively.
The price-to-earnings ratio is just 1.88, which is stunningly low, but reflects the fact that this stock was over $15 a share in 2008.
There is also a very high dividend of over 5.5% supported by a robust cash position and a sustainable payout ratio.
For those concerned about fraud in Chinese stocks, consider this: none of the stocks that were delisted ever paid a dividend.
As pointed out in a recent article on www.emergingmoney.com about income stocks in Asia, dividends are more protection.