Three French Stocks Offering Nifty Dividends
Dr. Osman is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
France is one of the biggest economies in the world. Recent financial turmoil has hamstrung a lot of global economic powerhouses. However, the French economy has been relatively stable compared to some other European countries. At the moment, there are a number of stocks with mouth watering dividend yields in the French stock exchange. I decided to choose three stocks with attractive dividend yields and strong business models.
The first pick is from telecom industry, which has low co-relation with the economic environment, the second pick is a utility stock, and the third pick is an environment services company: Electricité de France S.A. (NASDAQOTH: ECIFY), Veolia Environnement SA (NYSE: VE) and France Telecom SA (NYSE: FTE). All of these companies have attractive dividend yields, strong cash flows, and impeccable business models, along with a solid market position.
France Telecom is the incumbent telephone operator in France, which accounts for about half of the firm's sales. The company gets 46% of revenues from wireless and 33% from fixed-line and other carrier services. Other largest revenue sources for the company include 8.8% from Spain, 8% from Poland and 19.4% from the rest of the world. Further, Orange Business Services supplies 15.7% of sales, along with an international carrier business and eliminations. France Telecom generated over €45 billion ($58.2 billion) at the end of 2011, and over €44 billion ($56.98 billion) in the trailing twelve months. For the trailing twelve months, EPS for the company stands at €1.40 ($1.81).
At the moment, France Telecom pays an annual dividend of €1.38 ($1.79) per share, yielding 16.7%, making it one of the highest yielding stocks in the market. Along with impressive revenues, the company generates massive amounts of cash. In each of the last five years, France Telecom has generated over €12 billion ($15.54 billion) in operating cash flows. In the trailing twelve months, the company generated €10.5 billion ($13.6 billion) in operating cash flows and spent €7.5 billion ($9.7 billion) in capital expenditures. In addition, the company paid €4.2 billion ($ 5.44 billion) in cash dividends and recorded free cash flows of just over €3 billion ($3.89 billion).
Electricité de France is one of the world's largest energy companies, controlling the French transmission and distribution grid, along with other pieces of the European grid and a massive global generation fleet. Its French nuclear fleet is comprised of 58 plants. It also operates the largest unregulated supply business in France, which acts as a broker between generators and retail end users. Revenues figures for the company are massive. Its revenues for the trailing twelve months stands just above €68 billion ($88.07 billion) and EPS is €1.70 ($2.20). It has massive pricing power, which gives it a huge advantage in the market and ensures solid revenues.
Furthermore, the company generates huge amounts of cash. At the end of the last year, it generated €8.4 billion ($10.89 billion) in operating cash flows. On the other hand, the company has been spending a substantial amount of cash in capital expenditures. As a result, for the last two years, free cash flows have been negative. However, the dividend payments have been fairly stable over the years. At the moment, the company pays an annual dividend of €1.15 ($1.49) per share, yielding 7.8%. Its massive size and pricing power gives it a unique position in the market, which will enable the company to maintain heavy dividend payments.
Veolia Environnement is one of the largest global environmental service companies. It provides utility and infrastructure asset management and maintenance for industrial and municipal customers in four separate segments. These segments are water treatment and distribution, energy solutions, waste collection and disposal, and transportation management. With operations in more than 70 countries, the company employs over 300,000 individuals. Veolia has incredibly strong operations generating around €30 billion ($38 billion) in revenues. In the trailing twelve months, the company reported €30.1 billion ($38.98 billion) in revenues, but losses from discontinued operations resulted in losses of € 0.53 ($0.69) per share.
However, cash flows of the company are incredibly strong and provide a good cover to its dividends. In the last twelve months, Veolia generated €2.9 billion ($3.76 billion) in cash flows from operations and paid € 664 million ($860 million) in cash dividends. Currently, the company pays an annual dividend of € 0.70 ($0.9079) per share, yielding 8.63%. Further, Veolia generated €553 million ($716.25 million) in free cash flows. Massive operations along with solid free cash flows should enable the company to reward its shareholders through dividends.
These three stocks have incredibly strong market positions and solid business models. In addition, these companies have a very good track record of rewarding their shareholders. I believe these stocks can be a welcome addition to any dividend portfolio. Further, these stocks will also provide substantial diversification benefit to the portfolio.
ecofinstat has no positions in the stocks mentioned above. The Motley Fool owns shares of France Telecom (ADR). Motley Fool newsletter services recommend France Telecom (ADR) and Veolia Environnement (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. Is this post wrong? Click here. Think you can do better? Join us and write your own!