etf trendsTim du Toit is editor and founder of Eurosharelab. On his website he reveals what more than 20 years of equity investment have taught him – sometimes at considerable cost. To discover how you can avoid costly mistakes and enjoy greater profits, sign up for his free newsletter “Investing that makes sense” at http://www.eurosharelab.com/

Here is my yearly list of the highest dividend yield companies in Europe and the UK.

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

Make sure you read to the end of the article where you can find my other European high dividend articles that may be of interest.

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 suggests that every year you 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 of my 10 top dividend yield companies is 7,4%, higher than the 6,9% last year.

Not a bad return if you consider the near non existing interest rates available on bank deposits and high quality bonds in Euro’s (1,4% on one year German government bonds for example).

What is also surprising is that the share prices are not much above their 52 week lows. On average my top 10 picks are trading at just over 15,4% (15% in 2010) above their 52 week lows. This means these high dividend yield companies have not participated in the market recovery at all.

This year the list of industries is more mixed than last year. However telecommunications make up by far the largest industry sector in the top 20 with seven companies listed.

Let’s take a quick look at the performance of the strategy over the last 2 years.

 

Year My top 10 return Top 20 return Stoxx 600 return My top 10 v Index Top 20 v Index
2009 15,00% 18,40% 15,60% -0,60% 2,80%
2010 8,90% 10,20% 10,30% -1,40% -0,10%

Source: Bloomberg (Returns exclude dealing costs and taxes)

Looking at the above table all I can say is don’t pay any attention to the companies I chose. You would have had higher returns by just buying the top 20.

Also the strategy did not do much better than the European Stoxx 600 index. But two years is too short a time period to be able to say if the strategy works.

Here is the list of the highest dividend yield UK and European companies:

My Pics Name Price Industry Dividend yield % Debt / Equity % Market Value (€ Millions) Dividend Payout Ratio % % from 52-week low
MARINE HARVEST 5,31 Fisheries 18,8 44,3 2.441 93 31
CABLE & WIRELESS COMMUNICATI 48,29 Telecom Services 10,5 298,8 1.406 208 10
MAN GROUP PLC 249,1 Invest Mgmnt/Advis Serv 9,3 37,3 5.142 169 23
OPAP SA 13,46 Gambling (Non-Hotel) 9,0 0,2 4.070 85 35
1 FRANCE TELECOM SA 15,745 Telephone-Integrated 8,9 132,9 41.693 97 12
CABLE & WIRELESS WORLDWIDE 51,95 Telecom Services 8,7 17,9 1.602 7874 13
MEDIASET SPA 4,132 Television 8,5 67,7 4.406 113 1
2 RWE AG 41,935 Electric-Integrated 8,3 121,3 22.816 56 1
3 SANOMA OYJ 13,82 Multimedia 8,0 68,7 2.235 60 6
SEADRILL LTD 190,8 Oil&Gas Drilling 7,9 169,6 11.521 0 65
KONINKLIJKE KPN NV 10,34 Telephone-Integrated 7,7 358,2 15.474 70 5
PAGESJAUNES GROUPE 7,502 Publishing-Periodicals 7,7 N/A 2.036 67 18
4 E.ON AG 20,375 Electric-Integrated 7,4 78,0 39.260 43 1
5 TELEFONICA SA 16,755 Telephone-Integrated 7,3 249,9 75.899 63 13
6 VIVENDI 19,185 Telecom Services 7,3 49,9 23.478 77 19
7 DRAX GROUP PLC 449,5 Diversified Operations 7,1 13,3 1.885 62 40
8 HOME RETAIL GROUP 210,8 Retail-Major Dept Store 7,0 0,0 1.931 63 12
NOKIA OYJ 5,925 Wireless Equipment 6,8 36,7 21.796 81 9
ORION OYJ-CLASS B 17,89 Medical-Drugs 6,7 23,5 2.531 91 33
9 CATLIN GROUP LTD 401,5 Property/Casualty Ins 6,6 3,7 1.694 43 26
10 DEUTSCHE TELEKOM AG-REG 10,61 Telephone-Integrated 6,6 133,0 44.769 178 23

Source: Bloomberg

Disclosure I have a position in Vivendi.

Table description

My Pics – 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 24 May 2011

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 capitalization – Market value of the company in millions of Euro’s

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 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.

Other dividend related articles:

Europe’s highest dividend yields 2010 – May 2010

Europe’s highest dividend yields 2010 – Update – December 2010

Dividend Dogs of Europe 2009 – May 2009

Dividend Dogs of Europe 2009 – Update – November 2009

Happy dividend hunting