|
22 May 2009
With the bulk of the 2008 year end
reporting behind us I compiled a list of European high dividend yield
stocks to identify attractive market sectors and possible high yield
investments.
I also put together a European Dogs
portfolio based on the American investment strategy called “Dogs
of the Dow” popularised by Michael O’Higgins in his book
Beating the Dow.
The strategy
proposes that an investor annually select the ten Dow Jones
Industrial Index stocks with the highest dividend yields. All shares
are sold after one year and then reinvested in the then ten highest
dividend yield shares.
The strategy has marginally
outperformed the Dow Jones Industrial Index over the last nine years
according to the Dogs of The
Dow website a site dedicated to the strategy.
The following table shows the results
of the US Dogs of the Dow strategy:
|
Year |
Dogs of the
Dow |
Dow Jones
Industrial Average |
|
2000 |
6.40% |
-4.70% |
|
2001 |
-4.90% |
-5.40% |
|
2002 |
-8.90% |
-15.00% |
|
2003 |
28.70% |
28.30% |
|
2004 |
4.40% |
5.30% |
|
2005 |
-5.10% |
1.70% |
|
2006 |
30.30% |
19.10% |
|
2007 |
-1.44% |
6.43% |
|
2008 |
-41.62% |
-33.80% |
|
Average |
0.87% |
0.21% |
Below is the table of the highest
dividend yield shares in Europe. Telecom, utility and oil companies
are particularly well represented.
The
numbers from one to ten in the “Dog” column shows my Dogs of
Europe portfolio suggestions for the year. I have avoided companies that have:
-
Announced
dividend cuts such as BT Group and Marks & Spencer
-
Announced
substantial earning declines such as ThyssenKrupp
-
Have
high payout levels which indicate that the historical dividend may
be unsustainable
|
Dog |
Company Name |
Price |
Industry |
Dividend
yield |
Debt /
Equity |
Market
Capitalisation (Millions) |
Dividend
Payout Ratio % |
% from
52-week low |
|
1 |
ENEL SPA |
4.26 |
Electric-Integrated |
11.5 |
305.1 |
26,370 |
60 |
32 |
|
|
AVIVA PLC |
345.75 |
Life/Health
Insurance |
9.5 |
131.3 |
9,470 |
N/A |
116 |
|
2 |
FRANCE TELECOM
SA |
16.84 |
Telephone-Integrated |
9.5 |
145.0 |
44,033 |
90 |
6 |
|
3 |
DEUTSCHE TELEKOM
AG-REG |
8.36 |
Telephone-Integrated |
9.3 |
116.5 |
36,461 |
228 |
7 |
|
4 |
ENI SPA |
16.65 |
Oil
Comp-Integrated |
7.8 |
46.9 |
66,689 |
53 |
41 |
|
5 |
RWE AG |
59.08 |
Electric-Integrated |
7.6 |
116.4 |
32,904 |
76 |
28 |
|
|
THYSSENKRUPP AG |
17.24 |
Steel-Producers |
7.5 |
40.1 |
8,870 |
27 |
47 |
|
|
BP PLC |
506.00 |
Oil
Comp-Integrated |
7.6 |
35.8 |
94,813 |
49 |
37 |
|
6 |
VIVENDI |
18.65 |
Multimedia |
7.5 |
51.4 |
21,833 |
61 |
14 |
|
|
BT GROUP PLC |
88.70 |
Telephone-Integrated |
7.3 |
9,793.7 |
6,870 |
71 |
26 |
|
|
DEUTSCHE
LUFTHANSA-REG |
9.49 |
Airlines |
7.4 |
53.0 |
4,346 |
54 |
23 |
|
|
BANCO SANTANDER
SA |
7.29 |
Commer Banks
Non-US |
7.1 |
751.1 |
59,454 |
54 |
86 |
|
|
ROYAL DUTCH
SHELL PLC-A SHS |
18.57 |
Oil
Comp-Integrated |
6.9 |
18.3 |
115,911 |
38 |
22 |
|
7 |
BASF SE |
29.03 |
Chemicals-Diversified |
6.7 |
82.6 |
26,663 |
62 |
63 |
|
8 |
SCHNEIDER
ELECTRIC SA |
55.05 |
Power
Conv/Supply Equip |
6.3 |
57.0 |
13,621 |
51 |
42 |
|
9 |
VODAFONE GROUP
PLC |
121.70 |
Cellular
Telecom |
6.4 |
34.8 |
63,876 |
60 |
26 |
|
|
DEUTSCHE POST
AG-REG |
9.57 |
Transport-Services |
6.3 |
52.4 |
11,570 |
N/A |
45 |
|
|
SKANSKA AB-B SHS |
85.50 |
Building-Heavy
Construct |
6.1 |
16.6 |
35,834 |
70 |
61 |
|
10 |
E.ON AG |
24.52 |
Electric-Integrated |
6.1 |
119.1 |
46,711 |
205 |
38 |
Disclosure
I do not have a position in any of the
selected Dogs of Europe companies
Complete list
A file with the complete list of 70
companies can be downloaded by clicking on the link below. I hope it gives you a few interesting ideas.
Dogs of Europe 2009 (PDF 13 KB)
Have you signed up for my free weekly newsletter "Investing that makes sense" yet?
Sign up now and receive
articles like this in your inbox weekly.
And if you sign up now you will also receive a
10 page free bonus report - Enhanced Checklist for Value Investors - with over
30 proven checklist items to improve your investment returns.
I respect your privacy - Privacy
Policy
Table
column description
|
Dog: |
My
selection for the Dogs of Europe portfolio for 2009. |
|
Price: |
Share
price on home exchange as at 19 May 2009 |
|
Industry: |
Industry
the company operates in |
|
Dividend Yield: |
Yield
calculated using the most recently announced net dividend divided
by the current market price |
|
Debt / Equity: |
Total
debt to total shareholders equity. I am very careful of companies
with high debt levels. |
|
Market capitalisation: |
Market
value of the company in its home currency in millions |
|
Dividend payout ratio: |
Cash
dividend / Net income before extraordinary income after minority
interests and preference dividends expressed as a percent. This
ratio indicates how sustainable the dividend is. A payout ratio of
100 or higher is most likely not sustainable. |
|
% from 52-week low: |
This indicates the
current share price movement from the 52-week low price. A number
10% shows that the price is currently 10% above the 52-week low
price. I wanted to see how the share has moved in the current
market rally. As mentioned I am not convinced of the rally and am
careful of shares that have advanced substantially |
Methodology:
I
compiled a list of companies from the following indices:
-
The
50 highest market capitalisation companies in the United Kingdom
FTSE 100 and European Euro Stoxx 600
-
German
DAX 30 index companies
-
European
Euro Stoxx 50 index companies
-
European
Stoxx 50 index companies
From
the combined list I eliminated duplicate names and sorted the
companies from highest to lowest on historical dividend yield.
From
this list I selected the 70 companies with the highest dividend
yields
P.S. A media company in the wrong country at the wrong time...
This month the company I found for subscribers is located in France.
In terms of the size of companies I look at its quite large with a market value of €1,72 billion.
The company owns the most popular television channel in one of the largest European countries but is also very active in new media channels including the internet, tablets and smart phones.
In spite of this, the market views it as an old media company that is soon going the way of the dinosaurs. However, when you look at its financial statements you will see what a great business it is.
Its balance sheet is solid with no debt, and it generates a high amount of free cash flow and profits. This enables it to pay a dividend of just under 7% that can easily be maintained and has room to increase.
When I recommended the company it was trading at 7 times free cash flow, 7,7 times 2010 earnings and 5,6 times EBIT to enterprise value.
I am sure you will agree this is undervalued.
To immediately get your hands on this value investment idea (for as little as €39) click here.
|
