A recent “Heard on the Street” column in The Wall Street Journal discussed about the juicy dividends offered by European stocks.

From the article:

“Average dividend yields on European stocks are now higher than those on government bonds for only the third time in 30 years. On the past two occasions, in early 2003 and 2009, that heralded a rally in equities. But although equity markets are below long-term price-to-book ratios, and European stocks have rallied in recent weeks, analysts are cautious about forecasting big gains, noting an uncertain growth outlook and lingering fears on sovereign debt. That is good news for income investors.

This year, European equities will yield 4.1%, estimates UBS, almost twice that of U.S. peers. That is above the current yield on AA-rated corporate bonds (3.3%) and the coupon on a 10-year government bond for a weighted average of 11 euro-zone countries (3.6%). Unlike the latter two, dividend yields are well above their 10-year average.

True, dividends can be cut. Payments have been cut some 40% since 2008, versus cuts of less than 30% in the past three recessions. The cancellation of BP’s dividend in June took 12% off forecasts for U.K. companies’ second-quarter payments, notes Capita Registrars. Corporate earnings could still disappoint: UBS forecasts of 24% European earnings growth in 2010 and 10% in 2011 compare with a 7% long-run average, and a contraction last year and in 2008.

But corporate cash balances are at or near all-time highs and gearing at multiyear lows. Companies are slowly returning to the acquisition trail: July’s M&A deal volume globally was the highest this year, notes Dealogic, with Europe leading the way. But dividend payments still look sustainable: Dividend cover at 1.6 times free cash-flow is in line with a 10-year average, notes UBS.”

European banks have traditionally paid high dividends in the past. However it is better to avoid the majority of them as they are still reeling under pressure from many issues related to the sub-prime crisis.  Quoting JP Morgan, the journal piece noted that telecoms, energy and utilities offer 5% to 6% yields.

In order to identify the top utilities in Europe, I used the Dow Jones Stoxx Europe 600 Utilities Index.This index offers exposure to 31 of the large European water, gas and electricity companies.

The Top 20 components in the Dow Jones Stoxx Europe 600 Utilities Index are listed below with their dividend yield as of August 9, 2010:

1.E.ON AG (OTC: EONGY)
Current Dividend Yield: 6.18%
Germany

2.GDF Suez (OTC: GDFZY)
Current Dividend Yield: 4.68%
France

3. Enel (E)
Current Dividend Yield: 5.61%
Italy

4.RWE AG (OTC: RWEOY)
Current Dividend Yield: 6.33%
Germany

5.Iberdrola (OTC: IBDRY)
Current Dividend Yield: 5.51%
Spain

6. National Grid Plc (NGG)
Current Dividend Yield: 8.34%
UK

7. Scottish & Southern Energy (OTC: SSEZY)
Current Dividend Yield: 3.44%
UK

8.EDF (OTC: ECIFF)
Current Dividend Yield: 3.09%
France

9. Centrica (OTC: CPYYY)
Current Dividend Yield: 5.32%
UK

10. Fortum (OTC: FOJCY)
Current Dividend Yield: 5.48%
Finland

11. Veolia Environnement (VE)
Current Dividend Yield: 5.18%
France

12. International Power (OTC:IPRPY)
Current Dividend Yield: 4.10% *
UK

* Update: International Power owners set for £1.4bn payout

13.Energias de Portugal (OTC: EDPFY)
Current Dividend Yield: 5.83%
Portugal

14. SNAM Rete Gas SpA (OTC: SNMRY)
Current Dividend Yield: 4.87%

15.United Utilities (OTC: UUGRY)
Current Dividend Yield: 7.67%
UK

16. Terna
Italy

17. Suez Environment (OTC: SZEVY)
Current Dividend Yield: 4.17%
France

18.  Severn Trent (OTC: SVTRY)
Current Dividend Yield: 3.28%
UK

19. Red Electrica Espana (OTC: RDEIY)
Current Dividend Yield: 5.40%
Spain

20. Gas Natural SDG (OTC: GASNY)
Current Dividend Yield: 7.79%
Spain