Dear Fellow Investor     

13 May 2010

 

Each year in May, with the bulk of the previous year’s financial reporting behind us, I compile a list of the UK and Europe’s highest dividend yield stocks to identify attractive market sectors and possible high yield investments.

Previous articles can be found here:
Dogs of Europe – May 2009

Dogs of Europe 2009 – Update

I have also selected my top 10 high dividend picks form the list based on the “Dogs of the Dow” investment strategy 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 stocks are sold after one year and then reinvested in the then ten highest dividend yield shares.

The average dividend yield my top 10 European high dividend yield portfolio is 6.9%. Not bad when compared to the low interest rated available on bank deposits and high quality bonds.

What is also surprising is that the share prices are not much above their 52 week lows. On average my top 10 picks is trading at just over 15% above their 52 week lows. This means these high dividend yield companies have not participated in the market rally at all.

Similar to last year utilities, telecommunication and integrated oil companies make up the largest part of the highest dividend payers.
Here are the UK and European highest dividend yield companies:

 

My Pics Name Price Industry Dividend yield Debt / Equity % Market Capitalisation (Millions) Dividend Payout Ratio % % from 52-week low
1 DEUTSCHE TELEKOM AG-REG 8.80 Telephone-Integrated 8.9 141 38,380 959 12
2 FRANCE TELECOM SA 16.15 Telephone-Integrated 8.7 150 42,775 76 8
3 VIVENDI 18.13 Multimedia 7.7 60 22,287 207 11

SEADRILL LTD 147.70 Oil&Gas Drilling 6.9 177 58,952 17 94

BP PLC 549.20 Oil Comp-Integrated 6.7 34 103,170 63 20

ENEL SPA 3.83 Electric-Integrated 6.5 213 35,991 42 21

SCOTTISH & SOUTHERN ENERGY 1077 Electric-Integrated 6.2 181 9,942 541 4

ENI SPA 16.47 Oil Comp-Integrated 6.1 54 65,968 83 10
4 ROYAL DUTCH SHELL PLC-B  1816 Oil Comp-Integrated 6.0 26 115,951 84 26

NATIONAL GRID PLC 608 Electric-Transmission 6.0 656 15,054 94 15
5 E.ON AG 25.32 Electric-Integrated 6.0 94 50,665 33 13
6 RWE AG 59.58 Electric-Integrated 5.9 158 33,474 54 15
7 GDF SUEZ 25.87 Electric-Integrated 5.8 72 58,487 74 10
8 TOTAL SA 40.23 Oil Comp-Integrated 5.7 51 94,477 63 13
9 VODAFONE GROUP PLC 139 Cellular Telecom 5.7 49 73,171 133 25
10 TELEFONICA SA 17.20 Telephone-Integrated 5.4 261 78,501 67 19

MUENCHENER RUECKVER AG 106.00 Reinsurance 5.4 27 20,925 43 17

BANCO SANTANDER SA 9.50 Commer Banks Non-US 5.1 511 78,174 46 43

GLAXOSMITHKLINE PLC 1187.5 Medical-Drugs 5.1 156 61,661 56 18

DEUTSCHE POST AG-REG 11.93 Transport-Services 5.0 91 14,424 342 38

ASTRAZENECA PLC 2850 Medical-Drugs 5.0 45 41,195 40 17

ALLIANZ SE-REG 83.03 Multi-line Insurance 4.9 96 37,687 40 36

TELECOM ITALIA SPA 1.03 Telephone-Integrated 4.8 169 18,806 44 14

BRITISH AMERICAN TOBACCO 2069 Tobacco 4.8 146 41,303 73 26

BAE SYSTEMS PLC 339.6 Aerospace/Defense 4.7 71 11,795 NA 15

 

 

Disclosure
I have a position in Deutsche Telekom, Vivendi and Vodafone all companies I have recommended to my subscribers

Table description

My Selection – My top picks for a UK and European high dividend yield portfolio.

Name – Name of the company

Price – Share price on home exchange and currency as at 10 May 2010

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.

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 of 10% shows that the price is currently 10% above the 52-week low price.

 

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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 25 companies with the highest dividend yields.

 

Please remember a list like this is just a start to identify attractive investments. Each company on the list should be further analysed using your normal research process.

 

Happy dividend hunting

 

Tim du Toit