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All Contents © 2017The Kiplinger Washington Editors
By Aaron Levitt
| December 2016
The Brexit, the Quitaly, generally high unemployment, the ripping apart of the E.U., low stagnating growth, double- and triple-dip recessions — you name it, the Old Country is suffering from it. With that in mind, European stocks certainty aren’t at the top of investor’s lists when it comes hot investment destinations. After all, would you really want to plunk a pile of hard-earned cash on European stocks right now, with all of this mess going on?
The answer should be a resounding yes.
Sure, Europe does have its warts. But you know what else it has? Some of the largest multinationals on the planet. The truth is, they get just as much — if not more — of their revenues from sources outside of Europe. And sales continue to be good, as they have looked towards emerging Asia for their sales. It’s just that the domestic economy is pretty darn bad.
But in that “badness,” investors can find opportunities — namely in some top European dividend stocks. The yield on the broad and multinational-filled Vanguard FTSE Europe ETF (VGK) is a whopping 3.5%.
In the end, European dividend stocks are a tremendous value to income seekers. And here are three of those European stocks to buy today.
This slide show is from InvestorPlace, not the Kiplinger editorial staff.
Pettersjan via Wikipedia (Modified)
Dividend yield: 3%
What do Johnnie Walker, Smirnoff, Captain Morgan and Guinness all have in common? They happen to be some of the biggest brands in their respective alcohol categories and have billions in annual global sales. They also happen to be owned and produced by Diageo plc (DEO). All in all, DEO’s brand range includes 14 of the top 100 premium distilled spirits brands and seven of the top-20 premium spirits brands worldwide.
That gives DEO a massive global footprint that isn’t really affected by what happens in Europe. In fact, Diageo has spent much of the last few years adding capacity and brands in far-off locales such as India and China to gain from the growing consumer markets in these places. These areas continue to see strong case volumes, sales and brand retention among drinkers. Meanwhile, new organic, natural flavors and varied promotions have helped turned the tide in slowing North American sales.
What it really means is that DEO stock remains a powerhouse of the global booze industry that continues to churn out healthy cash flows — cash flows that have trickled down to investors as big-time dividends.
Since its founding in 1998, Diageo has steadily paid a dividend semi-annually. That dividend has varied, as European dividend stocks base their payouts on percentages of profits, not a steady amount.
Courtesy Novo Nordisk
Dividend yield: 2.6%
When it comes to European stocks of multinationals, the healthcare sector is where the continent really shines. And shining brightest of all is Novo Nordisk A/S (NVO).
NVO has plenty of exposure to various therapies and drugs, but where it really makes its money is from diabetes. Diabetes has become a worldwide epidemic with new instances rising every year. Increased sedentary lifestyles, diets high in fatty processed foods and other cultural reasons have made the diseases more prevalent in our global society. The International Diabetes Federation (IDF) predicts that at least one in 10 adults will have diabetes by 2030.
While that’s bad for society, it’s good for NVO stock’s bottom line. Novo first created an insulin product back in the 1920’s and is now the leading producer of the medicine. The firm has a 47% share when looking at the total insulin market worldwide.
Perhaps equally as impressive, NVO commands a 46% share when looking at modern and next-generation insulin.
That dominating position in a medicine that is required for diabetes sufferers to live has resulted in serious cash flows and profits over it history. And with rates of diabetes continuing to grow across the globe and not just in Europe, investors can sit back and collect the firm’s high 2.6% dividend.
Dividend yield: 5.9%
When we think of the major oil companies, names like Exxon Mobil Corporation (XOM) dominate the conversation. However, Europe is full of some big-time energy stocks that pump out major dividends as well. One of the best happens to be Italy’s Eni SpA (E).
Yes, Italy is in the middle of the death throes of its Quitaly movement to leave the E.U., but in the end, that shouldn’t affect E very much. Eni is nearly as big as XOM and features a stable of assets — up-, mid- and downstream — across the globe. It’s one of the main oil producers in the low-cost Middle East and traditional elephant fields have dominated its cash flows and production profiles for years.
But Eni still has plenty of growth in its tank.
The firm continues to find insane amounts of natural gas in offshore Mozambique. These fields have the ability to provide plenty of long-term revenues for the energy major as the world transitions to a natural gas future. It’s basically becoming the Exxon of Europe in its shift to natural gas.
More importantly, management has been cautious in spending extra CAPEX on other projects to get these fields pumping ASAP.
In the end, Eni is a great all-around energy stock. But because of the Quitaly B.S., shares can now be had for a monster 5.9% dividend yield. This is one European dividend stock value that needs to be in your portfolio.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.
This article is from Aaron Levitt of InvestorPlace. As of this writing, he did not hold a position in any of the securities discussed.
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