Two Reasons On Why European Stocks Have Room To Grow

European stocks have been laggards this years relative to the decent performance of U.S. stocks. However moving forward, European stocks have better growth potential compared to their American peers for a variety of reasons two of which are discussed in this post.

1. Currently U.S. stocks are expensive while European equities are relatively cheap based on the P/E ratio. For example, as of Dec 11, the P/E for the US market is 19.5. The P/E ratios of some of the major European markets are lower at 15.8, 9.8, 19.4, 15.5 for Germany, Norway, Spain and the UK respectively. French stocks have a P/E of 19.4.

2.  European equities as measured by the MSCI Europe Index have under-performed MSCI USA in US dollar terms since the sovereign debt crisis.MSCI Europe performed well in sync with MSCI USA from 2009 thru mud-2011. But since then European stocks have under-performed again.Though European equities have had an upward trend since mid-2012 they still have more room to grow in order to catch up with American stocks as shown in the below chart:

Click to enlarge

MSCI Europe vs USA


Source: MSCI

Ten stocks from the Euro STOXX 50 Index are listed below with their current dividend yields for further research:

1.Company: Sanofi (SNY)
Current Dividend Yield: 4.23%
Sector: Pharmaceuticals
Country: France

2.Company: Danone SA (DANOY)
Current Dividend Yield: 2.98%
Sector:Food Products
Country: France

3.Company: BASF SE (BASFY)
Current Dividend Yield: 4,38%
Sector: Chemicals
Country: Germany

4.Company: Siemens AG (SIEGY)
Current Dividend Yield: 3.62%
Sector:Industrial Conglomerates
Country: Germany

5.Company: Telefonica SA (TEF)
Current Dividend Yield: 3.58%
Sector: Telecom
Country: Spain

6.Company: Volkswagen AG (VLKAY)
Current Dividend Yield: 2.48%
Sector: Auto Manufacturing
Country: Germany

7.Company: AXA Group (AXAHY)
Current Dividend Yield: 4.94%
Sector: Insurance
Country: France

8.Company: Banco Santander SA (SAN)
Current Dividend Yield: 9.68%
Sector: Banking
Country: Spain

9.Company: Eni SpA (E)
Current Dividend : 8.53%
Sector:Oil, Gas & Consumable Fuels
Country: Italy

10.Company:Air Liquide (AIQUY)
Current Dividend Yield: 2.65%
Sector: Chemicals
Country: France

Note: Dividend yields noted above are as of Dec 12, 2014. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure:  Long AXAHY and SAN

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