Dogs of the STOXX 2009 – Update

//Dogs of the STOXX 2009 – Update

Dogs of the STOXX 2009 – Update

 

5 November 2009

 

Dear Fellow Investor

 

 

 

 

In May this year I wrote an article Dogs of Europe 2009 (also called dogs of the STOXX) on the highest dividend paying stocks in Europe.
 
Due to popular demand I am updating the list.
 

To recap.
 

I put together a Dogs of European or Dogs of the STOXX 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.

 

 

 
From 22 May 2009 to 2 Nov 2009 my Dogs of the STOXX portfolio returned 11% including dividends. Slightly less than the European STOXX 600 index return of 14.8%
 
The table below shows the 40 highest dividend yield shares in Europe and the UK in descending dividend yield order.
 
Similar to May 2009 telecom, utility and oil companies are well represented.
 
The numbers from one to ten in the “May Dog” column shows my May 2009 Dogs of the STOXX 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
 
 
The only change I would suggest is that BASF be exchanged against BP PLC as management has said that BASF may not earn its cost of capital this year and the dividend may thus be at risk.

 

 

 

May Dog

Name

Price

Industry

Dividend yield

Debt / Equity %

Market Capitalisation (Millions)

Dividend Payout Ratio %

% from 52 week low

1

ENEL SPA

4.06

Electric-Integrated

9.6

305.1

38,131

60

43

3

DEUTSCHE TELEKOM AG-REG

9.29

Telephone-Integrated

8.4

116.5

40,517

228

19

 

AVIVA PLC

383.60

Life/Health Insurance

7.5

131.3

10,507

NA

140

2

FRANCE TELECOM SA

16.86

Telephone-Integrated

8.3

145.0

44,655

90

9

5

RWE AG

59.70

Electric-Integrated

7.5

116.4

33,226

76

29

6

VIVENDI

18.92

Multimedia

7.4

51.4

23,243

61

16

4

ENI SPA

16.91

Oil Comp-Integrated

6.8

46.9

67,731

53

43

 

SCOTTISH & SOUTHERN ENERGY

1,079.00

Electric-Integrated

6.1

181.3

9,959

541

5

 

BP PLC

572.30

Oil Comp-Integrated

5.9

36.4

107,347

49

43

 

NATIONAL GRID PLC

606.50

Electric-Transmission

5.9

674.9

14,921

94

19

9

VODAFONE GROUP PLC

134.55

Cellular Telecom

5.8

48.1

70,772

133

28

 

ROYAL DUTCH SHELL PLC-B SHS

1,760.00

Oil Comp-Integrated

6.1

18.3

111,516

27

34

 

ROYAL DUTCH SHELL PLC-A SHS

20.21

Oil Comp-Integrated

6.0

18.3

124,314

27

32

 

REPSOL YPF SA

18.17

Oil Comp-Integrated

4.7

41.1

22,177

47

62

 

BANCO SANTANDER SA

11.00

Commer Banks Non-US

4.7

751.0

89,674

54

180

 

MARKS & SPENCER GROUP PLC

342.50

Retail-Major Dept Store

5.2

147.0

5,409

54

76

10

E.ON AG

26.09

Electric-Integrated

5.8

119.1

52,206

205

47

 

TOTAL SA

40.64

Oil Comp-Integrated

5.6

49.1

95,371

51

19

 

CENTRICA PLC

248.30

Gas-Distribution

5.0

82.0

12,737

NA

22

 

BT GROUP PLC

131.30

Telephone-Integrated

5.0

9,793.7

10,178

NA

87

7

BASF SE

36.50

Chemicals-Diversified

5.4

82.6

33,524

62

82

 

BAE SYSTEMS PLC

314.50

Aerospace/Defense

4.8

38.4

11,133

12

7

 

GLAXOSMITHKLINE PLC

1,250.00

Medical-Drugs

4.8

204.1

64,859

64

27

 

IBERDROLA SA

6.18

Electric-Integrated

4.3

133.7

32,459

57

42

 

TELEFONICA SA

19.03

Telephone-Integrated

4.3

308.7

89,536

61

41

 

BRITISH AMERICAN TOBACCO PLC

1,943.00

Tobacco

4.6

175.1

38,790

68

31

 

MUENCHENER RUECKVER AG-REG

107.64

Reinsurance

5.1

33.1

21,248

71

36

 

SKANSKA AB-B SHS

106.00

Building-Heavy Construct

5.0

16.6

44,426

70

99

 

GDF SUEZ

28.51

Electric-Integrated

4.9

68.7

64,419

63

29

 

REED ELSEVIER PLC

462.20

Publishing-Books

4.4

0.0

5,604

91

14

8

SCHNEIDER ELECTRIC SA

71.01

Power Conv/Supply Equip

4.9

57.0

18,600

51

73

 

NOKIA OYJ

8.63

Wireless Equipment

4.6

31.3

32,319

4

29

 

TELECOM ITALIA SPA

1.08

Telephone-Integrated

4.6

163.8

19,014

47

42

 

PEARSON PLC

832.50

Multimedia

4.1

49.7

6,749

71

49

 

VINCI SA

35.63

Building-Heavy Construct

4.5

250.5

18,519

51

45

 

ALLIANZ SE-REG

78.04

Multi-line Insurance

4.5

110.9

35,356

40

73

 

SAINSBURY (J) PLC

329.90

Food-Retail

4.0

53.3

6,099

80

25

 

SANOFI-AVENTIS

49.75

Medical-Drugs

4.4

13.4

65,453

75

29

 

HSBC HOLDINGS PLC

673.70

Diversified Banking Inst

3.9

362.4

117,258

135

149

 

ORKLA ASA

53.20

Food-Misc/Diversified

4.2

70.2

54,739

NA

62

Source: Bloomberg 2 November 2009  See Column description and methodology at the end of this article

 

 

 

 

 

Disclosure
Of the suggested dog shares I have a position in Vivendi.
 

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The companies on the list are all large in mundane industries, but the yields are really attractive.
 
More than 8% in the current environment where I am earning less than 0.5% for a one month fixed deposit is worth a second look.
 
I just saw that Deutsche Telekom posted good third quarter numbers making the share especially attractive as the dividend will at worse be maintained.
 
 
On Saturday the 24th of October Germany set the clocks back to winter time. The following week at work winter really made its presence clear when I had to switch on the lights in the office at around 16:00. Its going to get darker a lot earlier as the solstice on December 21 is still some time away.
 
That is why I am looking forward to our trip to South Africa starting the last week in November.
 
I will have limited internet access the first week while staying with my father in Greyton near Cape Town. But after December 2nd everything should be back to normal.
 
Please excuse if my email replies take a bit longer during during that time. Around December 20th I will be back in Hamburg.
 
 
Regards
 
 
Tim du Toit