Dividend Gems
Morgan Stanley: 33 High-Yielding and Secure Dividend European Stocks
Some investors are avoiding Europe due to the Greek crisis. There are many European companies that are truly multinational firms with strong presence in emerging markets. Hence despite the current crisis one can be highly selective and pick quality stocks European stocks that offer not only stable growth but also high dividends.
Yesterday’s Wall Street Journal article Is It Safe to Buy Europe? discusses about investment options in Europe. From the article:
“The most successful investors, of course, spot opportunity where others see only danger—and possess the courage to rush in as everyone else flees. Most famously, in March 2009, with the Standard & Poor’s 500-stock index plunging through 800 toward a devilish 666, a few hardy souls placed buy orders among the stampede of sells—and were rewarded with the short-term rally of a lifetime. Miniversions of that historic turnaround play out frequently in markets around the world.
Investors with a contrarian bent are starting to tot up reasons to consider Europe now. Among them: Greece’s travails and the region’s overall economic sluggishness mean interest rates should remain low for an extended period of time. That could augur well for riskier investments such as European stocks, whose valuations seem favorable compared with other parts of the world. French and German companies, on average, trade at about 17 times their earnings per share, while U.K. companies fetch about 14 times earnings. That is much less than the 22.5 and 19 found in the U.S. and China, respectively.”
European blue chip companies generally have higher dividend yields than U.S. companies. For example, the current yield of the S&P 500 is just 1.87%. But the MSCI’s European Index has a dividend yield of 3.40%.
Morgan Stanley has identified a list of 33 European high and secure dividend paying stocks. These top dividend stocks are shown below:
| S. No. | Name | Ticker | Industry | Dividend Yield as of March 18, 2010 |
|---|---|---|---|---|
| 1 | A2A Spa | N/A | Utilities | N/A |
| 2 | Telefonica | TEF | Telecom | 6.20% |
| 3 | RSA | N/A | Insurance | N/A |
| 4 | Zurich Financial Services | ZFSVY | Insurance | 5.91% |
| 5 | KPN | KQICF | Telecom | N/A |
| 6 | Scottish & Southern | SSEZY | Utilities | 8.90% |
| 7 | Deutsche Post | N/A | Transportation | N/A |
| 8 | Royal Dutch Shell plc | RDS.A | Energy | 5.74% |
| 9 | Aviva | AV | Insurance | 7.51% |
| 10 | RWE AG | RWEOY | Utilities | 6.75% |
| 11 | National Grid plc | NGG | Utilities | 4.76% |
| 12 | BP Plc | BP | Energy | 5.82% |
| 13 | Home Retail Group | N/A | Retail | N/A |
| 14 | AstraZeneca | AZN | Drugs | 7.75% |
| 15 | Admiral Group plc | N/A | Insurance | N/A |
| 16 | TOTAL | TOT | Energy | 5.92% |
| 17 | Vodafone | VOD | Telecom | 3.80% |
| 18 | Snam Rete Gas | N/A | Utilities | N/A |
| 19 | GDF Suez | GDFZY | Utilities | 6.08% |
| 20 | Unibail-Rodamco | N/A | Real-Estate | N/A |
| 21 | GlaxoSmithKline | GSK | Drugs | 5.95% |
| 22 | Allianz | N/A | Insurance | N/A |
| 23 | British American Tobacco | BTI | Tobacco | 6.49% |
| 24 | BASF AG | BASFY | Chemicals | 4.33% |
| 25 | Atlantia Spa | N/A | Transportation | N/A |
| 26 | TeliaSonera | N/A | Telecom | N/A |
| 27 | Wolters Kluwer | N/A | Media | N/A |
| 28 | Sainsbury | N/A | Retail | N/A |
| 29 | Sanofi-Aventis | SNY | Drugs | 4.23% |
| 30 | BAE Systems | BAESY | Defense | 5.05% |
| 31 | H&M | N/A | Retail | 5.25% |
| 32 | Imperial Tobacco | ITYBY | Tobacco | |
| 33 | PPR | N/A | Retail | N/A |
Italian utility A2A is engaged in the production and distribution of electricity. It also markets natural gas and is involved in the trash collection business. It has a P/E of 12 and prospective dividend yield of 7.4% on the shares traded local exchange. The company generates plenty of cash to cover dividend payments. Spanish telecom giant Telefonica (TEF) generates the majority of the earnings from Latin America and the British-based Vodafone (VOD) has significant presence in many developing countries.
Among the utilities listed, Germany-based RWE AG (OTC: RWEOY) has a forecast P/E of 9.2 for this year and is a consistent dividend payer. The world’s largest chemical company BASF (OTC: BASFY) is also an industry leader and continues to expand into new markets.
Other stocks noted above in the drugs, insurance, retail and tobacco sector are also excellent choices for investing in European companies.
Ten Highest Dividend Paying Stocks from the Eurozone Countries
The Dow Jones EURO STOXX Select Dividend 30 Index consists of the 30 high-dividend-yielding companies of the Eurozone. The Eurozone countries include Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
The ETFlab DJ EURO STOXX® Select Dividend 30 ETF tracks the performance of the above index. The Top 10 holdings in this ETF are:
1. Banco Santander (STD)
Current Dividend Yield: 5.36%
Spain
2.Vallourec
France
3. Erste Group Bank (OTC: EBKDY)
Current Dividend Yield: 2.27%
Austria
4. Metso Oyj (OTC: MXCYY)
Current Dividend Yield: 3.04%
Finland
5. Wartsila OYJ
Finland
6.Banco Popular Espanol
Spain
7. Unilever NV (UN)
Current Dividend Yield: 1.77%
The Netherlands
8. Bilfinger Berger AG
Germany
9. Enel Spa (E)
Current Dividend Yield: 6.08%
Italy
10. Wereldhave nV
The Netherlands
Please note that the dividend yields are noted only for the companies that trade as ADRs in the US markets.
High Dividend Stocks in NASDAQ
The table below lists some of the high dividend yield stocks trading in the Nasdaq market. These stocks offer over 10% dividends.
| Name | Ticker | Dividend Yield as of February 9, 2010 |
|---|---|---|
| Apollo Investment Corp. | AINV | 10.89% |
| Alaska Communications Systems Group, Inc | ALSK | 12.57% |
| Ares Capital Corporation | ARCC | 11.83% |
| Capital Bank Corporation | CBKN | 10.13% |
| Collectors Universe, Inc. | CLCT | 10.85% |
| Copano Energy, L.L.C. | CPNO | 10.55% |
| Formula Systems Ltd. (ADR) | FORTY | 20.98% |
| Gladstone Capital Corporation | GLAD | 10.37% |
| Gladstone Commercial Corporation | GOOD | 10.85% |
| Linn Energy, LLC | LINE | 10.00% |
| Monarch Community Bancorp, Inc. | MCBF | 11.43% |
| New York Mortgage Trust, Inc. | NYMT | 14.66% |
| Otelco, Inc. (USA) | OTT | 12.08% |
| Prospect Capital Corporation | PSEC | 15.08% |
| Qualstar Corporation | QBAK | 10.91% |
| StoneMor Partners L.P. | STON | 11.84% |
| TICC Capital Corp. | TICC | 10.10% |
| Hercules Technology Growth Capital Inc | HTGC | 12.28% |
| NUCRYST Pharmaceuticals Corp. (USA) | NCST | 45.20% |
| Supertel Hospitality Inc | SPPRP | 10.85% |
| Himax Technologies, Inc. (ADR) | HIMX | 10.17% |
| Compass Diversified Holdings | CODI | 11.41% |
| EV Energy Partners, L.P. | EVEP | 10.22% |
| Kohlberg Capital Corp. | KCAP | 20.57% |
| Legacy Reserves LP | LGCY | 10.84% |
| Triangle Capital Corporation | TCAP | 13.83% |
| Capital Product Partners L.P. | CPLP | 19.25% |
| PennantPark Investment Corp. | PNNT | 11.27% |
| Blackrock Kelso Capital Corp. | BKCC | 14.88% |
| Main Street Capital Corporation | MAIN | 10.69% |
| American Capital Agency Corp. | AGNC | 20.57% |
| Supertel Hospitality Inc | SPPRO | 11.11% |
| Windstream Corporation | WIN | 10.01% |
Ten Components of the DJ U.S. Select Dividend Index
The Dow Jones U.S. Select Dividend Index tracks the performance of the 100 stocks with the highest dividend yields on the Dow Jones U.S. Total Market Index.
The components of this index are selected based on:
- Dividend/Earnings Ratio
- Trading Volumes
- Dividend Yields
The iShares Dow Jones U.S. Select Dividend ETF is domiciled in Germany. There are 100 stocks in this fund.The Top 10 holdings are listed below with their current yields as of Jan 5,2010:
1.Company: Lorillard (LO)
Current Dividend Yield: 5.04 %
Sector:Tobacco
2.Company: Entergy Corp (ETR)
Current Dividend Yield: 3.65 %
Sector:Electric Utilities
3.Company: CenturyTel (CTL)
Current Dividend Yield: 7.63 %
Sector:Communications Services
4.Company: Chevron Corp (CVX)
Current Dividend Yield: 3.42 %
Sector:Oil & Gas - Integrated
5.Company: Mercury General Corp(MCY)
Current Dividend Yield: 6.01 %
Sector: Insurance (Property & Casualty)
6.Company: V.F. Corp (VFC)
Current Dividend Yield: 3.21%
Sector:Apparel/Accessories
7.Company: Kimberly Clark (KMB)
Current Dividend Yield: 3.73%
Sector:Paper & Paper Products
8.Company: FirstEnergy(FE)
Current Dividend Yield: 4.76%
Sector: Electric Utilities
9.Company: McDonald’s Corp (MCD)
Current Dividend Yield: 3.53%
Sector:
10.Company: DTE Energy (DTE)
Current Dividend Yield: 4.92%
Sector: Electric Utilities
Some of the other dividend stocks included in the portfolio are Clorox(CLX), Bank of Hawaii (BOH),FPL Group (FPL), General Mills(GIS), etc. The full listing of 100 stocks can be downloaded here.
Ten German Stocks with High Dividend Yields
The German economy is the largest in Europe and the country is home to many of the world’s top companies such as BMW, Siemens, Volkswagen, etc. German companies also hold the leadership position in the chemical industry.
In order to identify the high dividend-paying German stocks I used the iShares DivDAX ETF (EXSB) which tracks the DivDAX index. This index tracks the 15 stocks with the highest dividends out of the 30 largest and most liquid German companies by market capitalization.
The Top 10 Holdings in the iShares DivDAX ETF are listed below together with current dividend yield:
1. BASF (OTC: BASFY)
Current Dividend Yield: 4.12%
2. Bayer (OTC: BAYRY)
Current Dividend Yield: 2.38%
3. Deutsche Telecom (DT)
Current Dividend Yield: 6.99%
4. Allianz AG
Delisted from NYSE
5. RWE AG (OTC: RWEOY)
Current Dividend Yield: 6.16%
6. E.ON AG (OTC: EONGY)
Current Dividend Yield: 4.98%
7. Siemens AG (SI)
Current Dividend Yield: 2.67%
8. Muench Rueckvers (OTC: MURGY)
Current Dividend Yield: 4.66%
9. Deutsche Post AG (OTC: DPSTF)
Current Dividend Yield: No Regular Dividends
10. Deustche Boerse (OTC: DBOEY)
Current Dividend Yield: 3.70%
To download the ETF factsheet, click here.
Dividend Gems - ADRs !!!
Stocks that pay dividends are always a better bet than those that don’t. There are thousands of dividend paying ADRs. The trick is to find stocks that have a higher “Payout Ratio” and payment consistency over many years.
“Payout Ratio” just means the percentage of profits a firm pays out as dividends to shareholders. For eg - if a company XYZ Inc makes $100M in profits and its dividend payout ratio is 50%, then the company pays out $50M in dividends to its shareholders. XYZ Inc will be better than a company that pays out only 40%.
Dividends in general are an indicator of a firm’s profitability. It is something that cannot be faked and is real cash coming out of profits. So if a firm does not make profits it cannot pay a dividend. For eg - XYZ cannot borrow $50M and pay it out as dividends if its business went bad and the firm makes $0 in profits.
Higher payout ratio indicates that the company believes that there is not enough growth opportunities to re-deploy the profit and hence it makes sense to distribute the cash to stockholders who may use it as they wish. Higher payout ratio also indicates that the company is making more profits than a firm with a lesser ratio.
The following list shows a few ADR stocks that have high payout ratio. Most of them are banks as they tend to have higher yields.
| S.No. | Company | Ticker | Country | Payout Ratio |
|---|---|---|---|---|
| 1 | Fortum | No ADR yet | Finland | 50 to 60% |
| 2 | Verbund | OEZVY | Austria | 40% |
| 3 | Royal Bank of Canada | RY | Canada | 40 to 50% |
| 4 | Bank of Novo Scotia | BNS | Canada | 33 to 44% |
| 5 | EON AG | EONGY | Germany | 50% |
| 6 | TD Bank | TD | Canada | 35 to 45% |
| 7 | Bank of Montreal | BMO | Canada | 45 to 55% |
| 8 | Canadian Imperial Bank of Commerce | CM | Canada | 33.4%; Goal 40 to 50% |
| 9 | Danske Bank | DNSKY | Denmark | 30 to 50% |
| 10 | Swede Bank | SWDBY | Sweden | 40% |
| 11 | Erste Bank | EBKDY | Austria | No fixed ratio - But to increase dividend by 10% each year if targets achieved. |
| 12 | Allied Irish Bank | AIB | Ireland | 41% |
| 13 | Societe Generale | SCGLY | France | 42% |
Note: More stocks will be added to this table periodically
