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:
- A2A – Utilities
- Abertis Infraestructuras – Transport
- Acs Activ.Constr.Y Serv. – Capital Goods
- Admiral Group – Insurance
- Aviva Insurance (AV) – Overweight
- Banco Comr.Portugues – Banks
- Banco Espirito Santo – Banks
- Banco Santander (SAN) – Banks
- Bank Of Cyprus (Ath) – Banks
- Caixabank – Banks
- Credit Agricole – Banks
- Delta Lloyd Group – Insurance
- Elisa – Telecoms
- Enel (ENLAY) – Utilities
- Finmeccanica – Capital Goods
- Fomento Constr.Y Cntr. – Capital Goods
- Fonciere Des Regions – Real Estate
- France Telecom (FTE)– Telecoms
- Icade – Real Estate
- Intesa Sanpaolo Rsp (ISNPY) – Banks
- KPN – Telecoms
- M6-Metropole Tv – Media
- Man Group Div – Financials
- Mediaset – Media
- Nokia Tech – Hardware
- OPAP – Cons Svs
- Orkla – Capital Goods
- Pandora Cons – Durables
- Peugeot (PEUGY) – Autos
- Portugal Telecom (PT) – Telecoms
- PostNL – Transport
- Prosieben Sat 1 Pf. – Media
- Public Power – Utilities
- RSA Insurance Group – Insurance
- RWE (RWEOY) – Utilities
- Sanoma – Media
- Seadrill (SDRL) – Energy
- Telecom Italia Rsp (TI)– Telecoms
- Telefonica (TEF) – Telecoms
- Telekom Austria (TKAGY) – Telecoms
- Veolia Environnement – Utilities
- Vivendi – Telecoms
- 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
