Europe is, for lack of a more descriptive word, in disarray. The euro is under tremendous pressure after the Union decided to do an about-face and bail out Greece, which was headed for certain insolvency. Spain’s unemployment rate is projected to hit 20%. Ireland’s is already there. Portugal, despite constant denials by the government, is facing similar problems.
John Mauldin, a well-known market and economic commentator, thinks things are only going to get worse for the old continent. “The euro is on its way to parity with the dollar. So is the pound. That is going to help their exports vis-à-vis the US. Watch the yen fall rather sharply over the next few years. Senators Schumer and Graham gripe about China. What are they going to say about Europe, Britain, and Japan, all of which are on course to premeditated devaluation? This is going to be just one more challenge for businesses in countries with the world's stronger currencies”. One euro currently trades at 1.26 dollars. Given the euro’s trajectory, parity seems the least of its concerns.
What does this mean for the thoughtful, conservative income-seeking investor? It means opportunity. “Buy when there’s blood in the streets”, said Baron Rothschild.
According to EuroShareLab.com, their top five picks in the European market all yield more than 6%, with the top payers yielding an incredible 8.9%. All five are available to US investors through the various US exchanges or over-the-counter markets.
Top of the list is German telecoms giant Deutsche Telekom (DT). The firm is yielding 9.22% in dividends, a mammoth yield even compared to AT&T (T) or Verizon (VZ). The company is best known to US residents as the owner of the T-Mobile network, but is also the largest telecoms company in Europe. It operates in 50 countries and employs 260,000 people.
In second place is GDF Suez (GDFZY), a $74 billion company. GDF Suez is a French-based energy company active in the fields of electricity generation and distribution, natural gas and renewable energy. It is the world’s second-largest utility. At the current price around $30, the company is providing a yield of 8.9%.
Third is another telecom company in the form of France Telecom (FTE). The French giant yields 8.78%. Despite a drop in earnings last year the company still managed to pay out $1.74 in dividends. It currently employs about 180,000 people (half outside of France) and has 192.7 million customers worldwide (2010), with a flagship Orange mobile brand.
Fourth is Vivendi (VIVDY), a French international media conglomerate with activities in music, television and film, publishing, telecommunications, the Internet, and video games. It is headquartered in Paris. The company also has large operations in Brazil, Morocco, Mauritania, Burkina Faso, Gabon and Mali. The market cap is about $26 billion. Vivendi yields 8.72% in dividends.
Finally, with a yield of 7.17% is British Petroleum (BP), which has been totally whacked since deciding to spill copious amounts of oil into the Gulf of Mexico about three weeks ago. BP may yet be a great opportunity, and with a yield twice that of peers with limited liability for the oil spill, is perhaps the most secure of all these picks.
Make sure you do thorough research before investing for dividends, particularly for stocks that are based outside of the US, even though they provide arguably better prospects and returns than similar US companies.
To see the BestCashCow Dividends page, click here.
Disclosure: EuroShareLab has recommended DT and has a position.
Comments
Kahuna
May 19, 2010
Love the site but I'm a bit confused by the premise of this article - if the belief is the Euro is headed for parity with the dollar, don't US investors want to be worried about the dividends on these companies decreasing since the companies pay in Euros and US ADR investors get their dollar dividends at the prevailing exchange rate? The DT 0.78 Euro dividend is $1.03 & 9.22% at this May's exchange rate of $1.32/Euro but at parity would only be $0.78 or ~7.05%. While still healthy, the exchange rate risk if you really believe in Euro/$ parity changes how this stock looks relative to US stocks pretty substantially, not accounting for economic uncertainty on both sides. Either way, it's great to see a sumary of high yielders outside the US!
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Sean Riskowitz
May 19, 2010
Currencies are the product of government policy. All currencies lose value over time. In the short-term currency movements are extremely volatile and difficult to predict.
The idea of the euro achieving parity with the dollar allows US investors to source high dividend yields in Europe. The cost of the future dividend yield is lower and the quality of the issuer higher. The key really is to step back and look at the long-term, as the short-term really only provides opportunities. The dividend seeking investor should take a conservative long-term approach and not worry about short-term currency movements or stock valuations.
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fxmaven
May 20, 2010
Europe is the doghouse at the moment, but please notice that the EZ still has a positive trade balance (which will improve further). Also there are EUR real positive interest rates unlike US. I personally believe the worst is now over for the USD/EUR, with potential downside to 1.15. China is far more worried about Europe than the US, as Europe still produces exports and will be very competitive with China based on higher quality products. I am long TEF (Telefonica ADR) for its position in Brazil and LatAM.
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