Tim 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
