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Dogs of Europe 2009

22 May 2009

With the bulk of the 2008 year end reporting behind us I compiled a list of European high dividend yield stocks to identify attractive market sectors and possible high yield investments.

I also put together a European Dogs portfolio based on the American investment strategy called “Dogs of the Dow” popularised by Michael O’Higgins in his book Beating the Dow.

The strategy proposes that an investor annually select the ten Dow Jones Industrial Index stocks with the highest dividend yields. All shares are sold after one year and then reinvested in the then ten highest dividend yield shares.

The strategy has marginally outperformed the Dow Jones Industrial Index over the last nine years according to the Dogs of The Dow website a site dedicated to the strategy.

The following table shows the results of the US Dogs of the Dow strategy:

Year

Dogs of the Dow

Dow Jones Industrial Average

2000

6.40%

-4.70%

2001

-4.90%

-5.40%

2002

-8.90%

-15.00%

2003

28.70%

28.30%

2004

4.40%

5.30%

2005

-5.10%

1.70%

2006

30.30%

19.10%

2007

-1.44%

6.43%

2008

-41.62%

-33.80%

Average

0.87%

0.21%

Below is the table of the highest dividend yield shares in Europe. Telecom, utility and oil companies are particularly well represented.

The numbers from one to ten in the “Dog” column shows my Dogs of Europe portfolio suggestions for the year. I have avoided companies that have:

  • Announced dividend cuts such as BT Group and Marks & Spencer

  • Announced substantial earning declines such as ThyssenKrupp

  • Have high payout levels which indicate that the historical dividend may be unsustainable

Dog

Company Name

Price

Industry

Dividend yield

Debt / Equity

Market Capitalisation (Millions)

Dividend Payout Ratio %

% from 52-week low

1

ENEL SPA

4.26

Electric-Integrated

11.5

305.1

26,370

60

32

AVIVA PLC

345.75

Life/Health Insurance

9.5

131.3

9,470

N/A

116

2

FRANCE TELECOM SA

16.84

Telephone-Integrated

9.5

145.0

44,033

90

6

3

DEUTSCHE TELEKOM AG-REG

8.36

Telephone-Integrated

9.3

116.5

36,461

228

7

4

ENI SPA

16.65

Oil Comp-Integrated

7.8

46.9

66,689

53

41

5

RWE AG

59.08

Electric-Integrated

7.6

116.4

32,904

76

28

THYSSENKRUPP AG

17.24

Steel-Producers

7.5

40.1

8,870

27

47

BP PLC

506.00

Oil Comp-Integrated

7.6

35.8

94,813

49

37

6

VIVENDI

18.65

Multimedia

7.5

51.4

21,833

61

14

BT GROUP PLC

88.70

Telephone-Integrated

7.3

9,793.7

6,870

71

26

DEUTSCHE LUFTHANSA-REG

9.49

Airlines

7.4

53.0

4,346

54

23

BANCO SANTANDER SA

7.29

Commer Banks Non-US

7.1

751.1

59,454

54

86

ROYAL DUTCH SHELL PLC-A SHS

18.57

Oil Comp-Integrated

6.9

18.3

115,911

38

22

7

BASF SE

29.03

Chemicals-Diversified

6.7

82.6

26,663

62

63

8

SCHNEIDER ELECTRIC SA

55.05

Power Conv/Supply Equip

6.3

57.0

13,621

51

42

9

VODAFONE GROUP PLC

121.70

Cellular Telecom

6.4

34.8

63,876

60

26

DEUTSCHE POST AG-REG

9.57

Transport-Services

6.3

52.4

11,570

N/A

45

SKANSKA AB-B SHS

85.50

Building-Heavy Construct

6.1

16.6

35,834

70

61

10

E.ON AG

24.52

Electric-Integrated

6.1

119.1

46,711

205

38

Disclosure

I do not have a position in any of the selected Dogs of Europe companies

Complete list

A file with the complete list of 70 companies can be downloaded by clicking on the link below. I hope it gives you a few interesting ideas.

Dogs of Europe 2009 (PDF 13 KB)

 

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Table column description

Dog:

My selection for the Dogs of Europe portfolio for 2009.

Price:

Share price on home exchange as at 19 May 2009

Industry:

Industry the company operates in

Dividend Yield:

Yield calculated using the most recently announced net dividend divided by the current market price

Debt / Equity:

Total debt to total shareholders equity. I am very careful of companies with high debt levels.

Market capitalisation:

Market value of the company in its home currency in millions

Dividend payout ratio:

Cash dividend / Net income before extraordinary income after minority interests and preference dividends expressed as a percent. This ratio indicates how sustainable the dividend is. A payout ratio of 100 or higher is most likely not sustainable.

% from 52-week low:

This indicates the current share price movement from the 52-week low price. A number 10% shows that the price is currently 10% above the 52-week low price. I wanted to see how the share has moved in the current market rally. As mentioned I am not convinced of the rally and am careful of shares that have advanced substantially

Methodology:

I compiled a list of companies from the following indices:

  • The 50 highest market capitalisation companies in the United Kingdom FTSE 100 and European Euro Stoxx 600

  • German DAX 30 index companies

  • European Euro Stoxx 50 index companies

  • European Stoxx 50 index companies

From the combined list I eliminated duplicate names and sorted the companies from highest to lowest on historical dividend yield.

From this list I selected the 70 companies with the highest dividend yields

By |May 22nd, 2009|