Seeking Alpha: AFP Provida - A Very Different Dividend Play

There aren't too many companies out there quite like AFP Provida (PVD). Provida is part of the Chilean pension system; a system that requires Chilean workers to contribute to privately-run pension plans that manage the money on their behalf for retirement. With a growing population and a lucrative fee-collecting business, Provida is an interesting way for American investors to collect significant dividends from a company heavily levered to economic growth in one of the more stable Latin American economies.

A Weird Mix Of Private And Public
There is nothing especially normal or straightforward about the system in which Provida operates. A long time ago now, the Chilean government decided to scrap its public retirement system in favor of a system that would let private pension companies invest and manage money on behalf of workers.

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AFP Provida: A Very Different Dividend Play

Investopedia: Bank of America's Incredible Shrinking Liability

At this point in the credit crisis it would seem that anybody claiming to have a firm handle on everything going on is either crazy, dishonest or a singular genius. Take the latest news from Bank of America (NYSE:BAC) - the terms of a deal to settle much of its liability to Freddie Mac (Nasdq:FMCC) and Fannie Mae (Nasdaq:FNMA) for mortgage put-backs not only surprised most observers, but angered a lot of people all over again. Moreover, there is uncertainty everywhere an investor cares to look regarding whether or not other banks will be able to strike similar deals and how these banks will deal with other claimants.

A Quick Take on the Deal
Early in January, Bank of America announced a deal with Freddie and Fannie whereby it was settling its potential put-back obligations to these entities for a total of $2.8 billion. This deal covers just mortgages related to Countrywide (which Bank of America bought), but will avoid more litigation regarding BAC's ultimate responsibility in buying back misrepresented or outright fraudulent mortgages under the terms of the put-back agreements that it had with these agencies.

In many respects, this was a deal so favorable to BAC it was close to outright theft. The liability between BAC and Freddie/Fannie could have been anywhere from $10 billion to upwards of $20 billion depending upon the assumptions an investor wanted to make about the settlement. As it stands, even more than $20 billion would have represented only about a 1% delinquency rate for these loans, when the actual rate has been running more like 11%.

It is also worth mentioning that this is tantamount to another bailout for the banks. Freddie/Fannie are under direct government control, while Bank of America (along with Citigroup (NYSE:C), Wells Fargo (NYSE:WFC) and many others) needed very cheap government money to stay liquid. What is interesting about this move, though, is that it avoids the splashy headlines of another TARP-like program that would be announced from a White House or Congressional podium. (For more, see Liquidity And Toxicity: Did TARP Fix The Financial System?)

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