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.
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.
PS If you want to implement a Dogs of Europe investment strategy in your portfolio take a look at the Quant Investing Stock screener
