HSBC: 43 High-Yielding European Stocks Likely To Outperform the Market

European equity markets have fallen heavily this year due to the ongoing debt crisis there. While most investors are avoiding European stocks some are wondering if the current opportunities are too good to pass up.

Yesterday strategists at HSBC published a research report stating that investors have a rare opportunity to invest in high-yielding European stocks. They identified the following 43 stocks that are likely to outperform the current market even if they cut dividends:

  1. A2A – Utilities
  2. Abertis Infraestructuras – Transport
  3. Acs Activ.Constr.Y Serv. – Capital Goods
  4. Admiral Group – Insurance
  5. Aviva Insurance (AV) – Overweight
  6. Banco Comr.Portugues – Banks
  7. Banco Espirito Santo – Banks
  8. Banco Santander (SAN) – Banks
  9. Bank Of Cyprus (Ath) – Banks
  10. Caixabank – Banks
  11. Credit Agricole – Banks
  12. Delta Lloyd Group – Insurance
  13. Elisa – Telecoms
  14. Enel (ENLAY) – Utilities
  15. Finmeccanica – Capital Goods
  16. Fomento Constr.Y Cntr. – Capital Goods
  17. Fonciere Des Regions – Real Estate
  18. France Telecom (FTE)– Telecoms
  19. Icade – Real Estate
  20. Intesa Sanpaolo Rsp (ISNPY) – Banks
  21. KPN – Telecoms
  22. M6-Metropole Tv – Media
  23. Man Group Div – Financials
  24. Mediaset – Media
  25. Nokia Tech – Hardware
  26. OPAP – Cons Svs
  27. Orkla – Capital Goods
  28. Pandora Cons – Durables
  29. Peugeot (PEUGY) – Autos
  30. Portugal Telecom (PT) – Telecoms
  31. PostNL – Transport
  32. Prosieben Sat 1 Pf. – Media
  33. Public Power – Utilities
  34. RSA Insurance Group – Insurance
  35. RWE (RWEOY) – Utilities
  36. Sanoma – Media
  37. Seadrill (SDRL) – Energy
  38. Telecom Italia Rsp (TI)– Telecoms
  39. Telefonica (TEF) – Telecoms
  40. Telekom Austria (TKAGY) – Telecoms
  41. Veolia Environnement – Utilities
  42. Vivendi – Telecoms
  43. Zurich Financial Svs.(ZFSVY) – Insurance

Source: CityWire UK

From the CityWire article:

‘The classic dilemma for investors is to decide whether these high yields represent a value opportunity or whether it is a sign of distress,’ they wrote. ‘It turns out that there is an element of truth in both views.’

Citing an analysis of 430 stocks in the MSCI Europe index in the period since 1994 to date, they said 77% of the companies cut their dividends at some point in the two years after their yields broke above the 8% level.

But the strategists added that they also found that the majority of the stocks had still beaten the market, even though they had cut their payouts to investors.

Utilities Enel (ENLAY) and RWE(RWEOY) have dividend yields of 6.76% and 13.51% currently based on their ADR prices. Telecom companies such as France Telecom(FTE) and Telefonica(TEF) are also excellent choices at current levels.

Disclosure: Long RWE, STD and VE

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