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
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.
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
