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In May this year I wrote
an article Dogs
of Europe 2009 (also called dogs of the
STOXX) on the highest dividend paying stocks in Europe.
Due to popular demand I am
updating the list.
To recap.
I put together a Dogs of
European or Dogs of the STOXX 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.
From 22 May 2009 to 2 Nov
2009 my Dogs of the STOXX portfolio returned 11% including dividends.
Slightly less than the European STOXX 600 index return of 14.8%
The table below shows the
40 highest dividend yield shares in Europe and the UK in descending
dividend yield order.
Similar to May 2009 telecom, utility and oil companies are well represented.
The numbers from one to
ten in the “May Dog” column shows my May 2009 Dogs of the STOXX
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
The only change I would
suggest is that BASF be exchanged against BP PLC as management has
said that BASF may not earn its cost of capital this year and the
dividend may thus be at risk.
|
May Dog |
Name |
Price |
Industry |
Dividend
yield |
Debt /
Equity % |
Market
Capitalisation (Millions) |
Dividend
Payout Ratio % |
% from 52
week low |
|
1 |
ENEL SPA |
4.06 |
Electric-Integrated |
9.6 |
305.1 |
38,131 |
60 |
43 |
|
3 |
DEUTSCHE TELEKOM
AG-REG |
9.29 |
Telephone-Integrated |
8.4 |
116.5 |
40,517 |
228 |
19 |
|
AVIVA PLC |
383.60 |
Life/Health
Insurance |
7.5 |
131.3 |
10,507 |
NA |
140 |
|
2 |
FRANCE TELECOM
SA |
16.86 |
Telephone-Integrated |
8.3 |
145.0 |
44,655 |
90 |
9 |
|
5 |
RWE AG |
59.70 |
Electric-Integrated |
7.5 |
116.4 |
33,226 |
76 |
29 |
|
6 |
VIVENDI |
18.92 |
Multimedia |
7.4 |
51.4 |
23,243 |
61 |
16 |
|
4 |
ENI SPA |
16.91 |
Oil
Comp-Integrated |
6.8 |
46.9 |
67,731 |
53 |
43 |
|
SCOTTISH &
SOUTHERN ENERGY |
1,079.00 |
Electric-Integrated |
6.1 |
181.3 |
9,959 |
541 |
5 |
|
BP PLC |
572.30 |
Oil
Comp-Integrated |
5.9 |
36.4 |
107,347 |
49 |
43 |
|
NATIONAL GRID
PLC |
606.50 |
Electric-Transmission |
5.9 |
674.9 |
14,921 |
94 |
19 |
|
9 |
VODAFONE GROUP
PLC |
134.55 |
Cellular
Telecom |
5.8 |
48.1 |
70,772 |
133 |
28 |
|
ROYAL DUTCH
SHELL PLC-B SHS |
1,760.00 |
Oil
Comp-Integrated |
6.1 |
18.3 |
111,516 |
27 |
34 |
|
ROYAL DUTCH
SHELL PLC-A SHS |
20.21 |
Oil
Comp-Integrated |
6.0 |
18.3 |
124,314 |
27 |
32 |
|
REPSOL YPF SA |
18.17 |
Oil
Comp-Integrated |
4.7 |
41.1 |
22,177 |
47 |
62 |
|
BANCO SANTANDER
SA |
11.00 |
Commer Banks
Non-US |
4.7 |
751.0 |
89,674 |
54 |
180 |
|
MARKS &
SPENCER GROUP PLC |
342.50 |
Retail-Major
Dept Store |
5.2 |
147.0 |
5,409 |
54 |
76 |
|
10 |
E.ON AG |
26.09 |
Electric-Integrated |
5.8 |
119.1 |
52,206 |
205 |
47 |
|
TOTAL SA |
40.64 |
Oil
Comp-Integrated |
5.6 |
49.1 |
95,371 |
51 |
19 |
|
CENTRICA PLC |
248.30 |
Gas-Distribution |
5.0 |
82.0 |
12,737 |
NA |
22 |
|
BT GROUP PLC |
131.30 |
Telephone-Integrated |
5.0 |
9,793.7 |
10,178 |
NA |
87 |
|
7 |
BASF SE |
36.50 |
Chemicals-Diversified |
5.4 |
82.6 |
33,524 |
62 |
82 |
|
BAE SYSTEMS PLC |
314.50 |
Aerospace/Defense |
4.8 |
38.4 |
11,133 |
12 |
7 |
|
GLAXOSMITHKLINE
PLC |
1,250.00 |
Medical-Drugs |
4.8 |
204.1 |
64,859 |
64 |
27 |
|
IBERDROLA SA |
6.18 |
Electric-Integrated |
4.3 |
133.7 |
32,459 |
57 |
42 |
|
TELEFONICA SA |
19.03 |
Telephone-Integrated |
4.3 |
308.7 |
89,536 |
61 |
41 |
|
BRITISH AMERICAN
TOBACCO PLC |
1,943.00 |
Tobacco |
4.6 |
175.1 |
38,790 |
68 |
31 |
|
MUENCHENER
RUECKVER AG-REG |
107.64 |
Reinsurance |
5.1 |
33.1 |
21,248 |
71 |
36 |
|
SKANSKA AB-B SHS |
106.00 |
Building-Heavy
Construct |
5.0 |
16.6 |
44,426 |
70 |
99 |
|
GDF SUEZ |
28.51 |
Electric-Integrated |
4.9 |
68.7 |
64,419 |
63 |
29 |
|
REED ELSEVIER
PLC |
462.20 |
Publishing-Books |
4.4 |
0.0 |
5,604 |
91 |
14 |
|
8 |
SCHNEIDER
ELECTRIC SA |
71.01 |
Power
Conv/Supply Equip |
4.9 |
57.0 |
18,600 |
51 |
73 |
|
NOKIA OYJ |
8.63 |
Wireless
Equipment |
4.6 |
31.3 |
32,319 |
4 |
29 |
|
TELECOM ITALIA
SPA |
1.08 |
Telephone-Integrated |
4.6 |
163.8 |
19,014 |
47 |
42 |
|
PEARSON PLC |
832.50 |
Multimedia |
4.1 |
49.7 |
6,749 |
71 |
49 |
|
VINCI SA |
35.63 |
Building-Heavy
Construct |
4.5 |
250.5 |
18,519 |
51 |
45 |
|
ALLIANZ SE-REG |
78.04 |
Multi-line
Insurance |
4.5 |
110.9 |
35,356 |
40 |
73 |
|
SAINSBURY (J)
PLC |
329.90 |
Food-Retail |
4.0 |
53.3 |
6,099 |
80 |
25 |
|
SANOFI-AVENTIS |
49.75 |
Medical-Drugs |
4.4 |
13.4 |
65,453 |
75 |
29 |
|
HSBC HOLDINGS
PLC |
673.70 |
Diversified
Banking Inst |
3.9 |
362.4 |
117,258 |
135 |
149 |
|
ORKLA ASA |
53.20 |
Food-Misc/Diversified |
4.2 |
70.2 |
54,739 |
NA |
62 |
Source:
Bloomberg 2 November 2009 See
Column description and methodology at the end of this article
Disclosure
Of the suggested dog shares I have a
position in Vivendi.
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Policy
The companies on the list are all large
in mundane industries, but the yields are really
attractive.
More than 8% in the current environment
where I am earning less than 0.5% for a one month fixed deposit is
worth a second look.
I just saw that Deutsche Telekom posted
good third quarter numbers making the share especially attractive as
the dividend will at worse be maintained.
On Saturday the 24th of
October Germany set the clocks back to winter time. The following
week at work winter really made its presence clear when I had to
switch on the lights in the office at around 16:00. Its going to get
darker a lot earlier as the solstice on December 21 is still
some time away.
That is why I am looking forward to our
trip to South Africa starting the last week in November.
I will have limited internet access the
first week while staying with my father in Greyton near Cape
Town. But after December 2nd everything should be back to
normal.
Please excuse if my email replies
take a bit longer during during that time. Around December 20th
I will be back in Hamburg.
Regards
Tim du Toit
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. |
