Five Big Healthy Dividends From Europe
Andrés is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The Eurozone crisis has been a reason for concern for a long term now, although measures like sovereign bond purchases by the European Central Bank seem to have provided some stability, the situation is still quite uncertain. There are many structural problems which will need to be worked out before we can say Europe is out of the woods for good.
But none of this means investors should stay away from European stocks; quite on the contrary, there are many solid companies with robust fundamentals which have what it takes to keep delivering solid results in spite of macroeconomic hurdles. Even better, some of these corporations are offering very attractive valuations, including big fat dividend yields to reward investors for their patience while they wait for Europe to leave its problems behind.
After all, businesses with healthy balance sheets and durable competitive advantages won´t go down because of a recession or even a full blown financial crisis. They may suffer temporary setbacks due to economic conditions, but good companies are built to last under the most challenging economic problems. For investors with a long term mindset, the European sovereign debt crisis may turn out to be a fantastic buying opportunity a few years from now.
GlaxoSmithKline (NYSE: GSK) is yielding a 4.5% dividend yield, and this global pharmaceutical has many exciting opportunities in vaccines and consumer products in addition to its drugs portfolio covering different therapeutic uses. Cervarix for HPV, Synflorix for pneumococcal disease, and its new lupus drug Benlysta have the potential to drive Glaxo into its new growth stage. Also, the company is one of the best exposed to emerging markets, where brand names are more important and product cycles are typically longer.
The telecommunications sector is not very popular among investors right now; regulatory risks, lackluster growth opportunities and profit margin compression are a genuine reason for concern. But those worries are already reflected in the price of Vodafone (NASDAQ: VOD), which is yielding more than 5% in dividends, a figure which seems very attractive for a global telecom operator with a solid track record of free cash flow generation. Vodafone operates in an unpopular industry and an even less popular region, but the company is strong enough to keep delivering its juicy dividends over time.
Another big global European pharmaceutical with an attractive dividend yield is Novartis (NYSE: NVS), which is yielding a 4.1% in dividends. The company has a diversified operating platform that includes branded pharmaceuticals, generics, vaccines, diagnostics, eye-care products, and consumer products, and this diversification reduces product specific risk. The generic segment offers Novartis exposure to the billions of dollars in branded pharmaceuticals going off patent during the next several years, and it mitigates the negative effect of patent losses for the company´s own branded products.
Royal Dutch Shell (NYSE: RDS-A) is one of the biggest integrated energy companies in the world, with a diversified exposure to different business areas and geographic regions. The company is finding it increasingly difficult to expand production and add reserves in a world with a shrinking investable resource base, but its size and cost structure make it an attractive partner for new projects. Shell is a world leader in the growing liquefied natural gas market, and it has attractive LNG projects in Africa, the Middle East, and Asia. The company pays a 4.1% dividend yield, which is well protected by its valuable asset base and abundant financial resources.
Sanofi (NYSE: SNY) is a global pharmaceutical with interesting growth prospects, the company has a very strong position in emerging markets and many attractive products in late pipeline stage. Sanofi has just suffered a setback after disappointing clinical-trial results for its dengue vaccine were recently reported, but this France based pharmaceutical still has promising perspectives in treatments for oncology and diabetes among others. Shares of Sanofi carry a 3.2% dividend yield.
These companies are exposed to economic jitters coming from Europe to a considerable degree, but they have a healthy level of diversification and solid fundamentals to survive any extra complications coming from that region. If Europe gets on the right track anytime soon, these stocks offer plenty of upside potential, and if investors need to wait for a better economic context, they still offer juicy dividend yields for compensate for that patience.
acardenal has no positions in the stocks mentioned above. The Motley Fool owns shares of GlaxoSmithKline. Motley Fool newsletter services recommend GlaxoSmithKline, Vodafone Group Plc (ADR), and Vodafone Group Plc (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.