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Dear Fellow Investor
13 May 2010
Each year in May, with the bulk of the previous year's financial reporting behind us, I compile a list of the UK and Europe's highest dividend yield stocks to identify attractive market sectors and possible high yield investments.
Previous articles can be found here:
Dogs of Europe - May 2009
Dogs of Europe 2009 - Update
I have also selected my top 10 high dividend picks form the list based on the “Dogs of the Dow” investment strategy 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 stocks are sold after one year and then reinvested in the then ten highest dividend yield shares.
The average dividend yield my top 10 European high dividend yield portfolio is 6.9%. Not bad when compared to the low interest rated available on bank deposits and high quality bonds.
What is also surprising is that the share prices are not much above their 52 week lows. On average my top 10 picks is trading at just over 15% above their 52 week lows. This means these high dividend yield companies have not participated in the market rally at all.
Similar to last year utilities, telecommunication and integrated oil companies make up the largest part of the highest dividend payers.
Here are the UK and European highest dividend yield companies:
| My
Pics |
Name |
Price |
Industry |
Dividend
yield |
Debt /
Equity % |
Market
Capitalisation (Millions) |
Dividend
Payout Ratio % |
% from
52-week low |
| 1 |
DEUTSCHE
TELEKOM AG-REG |
8.80 |
Telephone-Integrated |
8.9 |
141 |
38,380 |
959 |
12 |
| 2 |
FRANCE
TELECOM SA |
16.15 |
Telephone-Integrated |
8.7 |
150 |
42,775 |
76 |
8 |
| 3 |
VIVENDI |
18.13 |
Multimedia |
7.7 |
60 |
22,287 |
207 |
11 |
|
SEADRILL
LTD |
147.70 |
Oil&Gas Drilling |
6.9 |
177 |
58,952 |
17 |
94 |
|
BP
PLC |
549.20 |
Oil Comp-Integrated |
6.7 |
34 |
103,170 |
63 |
20 |
|
ENEL
SPA |
3.83 |
Electric-Integrated |
6.5 |
213 |
35,991 |
42 |
21 |
|
SCOTTISH
& SOUTHERN ENERGY |
1077 |
Electric-Integrated |
6.2 |
181 |
9,942 |
541 |
4 |
|
ENI
SPA |
16.47 |
Oil Comp-Integrated |
6.1 |
54 |
65,968 |
83 |
10 |
| 4 |
ROYAL
DUTCH SHELL PLC-B |
1816 |
Oil Comp-Integrated |
6.0 |
26 |
115,951 |
84 |
26 |
|
NATIONAL
GRID PLC |
608 |
Electric-Transmission |
6.0 |
656 |
15,054 |
94 |
15 |
| 5 |
E.ON
AG |
25.32 |
Electric-Integrated |
6.0 |
94 |
50,665 |
33 |
13 |
| 6 |
RWE
AG |
59.58 |
Electric-Integrated |
5.9 |
158 |
33,474 |
54 |
15 |
| 7 |
GDF
SUEZ |
25.87 |
Electric-Integrated |
5.8 |
72 |
58,487 |
74 |
10 |
| 8 |
TOTAL
SA |
40.23 |
Oil Comp-Integrated |
5.7 |
51 |
94,477 |
63 |
13 |
| 9 |
VODAFONE
GROUP PLC |
139 |
Cellular Telecom |
5.7 |
49 |
73,171 |
133 |
25 |
| 10 |
TELEFONICA
SA |
17.20 |
Telephone-Integrated |
5.4 |
261 |
78,501 |
67 |
19 |
|
MUENCHENER
RUECKVER AG |
106.00 |
Reinsurance |
5.4 |
27 |
20,925 |
43 |
17 |
|
BANCO
SANTANDER SA |
9.50 |
Commer Banks Non-US |
5.1 |
511 |
78,174 |
46 |
43 |
|
GLAXOSMITHKLINE
PLC |
1187.5 |
Medical-Drugs |
5.1 |
156 |
61,661 |
56 |
18 |
|
DEUTSCHE
POST AG-REG |
11.93 |
Transport-Services |
5.0 |
91 |
14,424 |
342 |
38 |
|
ASTRAZENECA
PLC |
2850 |
Medical-Drugs |
5.0 |
45 |
41,195 |
40 |
17 |
|
ALLIANZ
SE-REG |
83.03 |
Multi-line Insurance |
4.9 |
96 |
37,687 |
40 |
36 |
|
TELECOM
ITALIA SPA |
1.03 |
Telephone-Integrated |
4.8 |
169 |
18,806 |
44 |
14 |
|
BRITISH
AMERICAN TOBACCO |
2069 |
Tobacco |
4.8 |
146 |
41,303 |
73 |
26 |
|
BAE
SYSTEMS PLC |
339.6 |
Aerospace/Defense |
4.7 |
71 |
11,795 |
NA |
15 |
Disclosure
I have a position in Deutsche Telekom, Vivendi and Vodafone all companies I have recommended to my subscribers
Table description
My Selection - My top picks for a UK and European high dividend yield portfolio.
Name - Name of the company
Price - Share price on home exchange and currency as at 10 May 2010
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.
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 of 10% shows that the price is currently 10% above the 52-week low price.
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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 25 companies with the highest dividend yields.
Please remember a list like this is just a start to identify attractive investments. Each company on the list should be further analysed using your normal research process.
Happy dividend hunting
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.
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