Bei vielen einkommensorientierten Investoren führen europäische Aktien ein ziemliches Nischendasein.
Allerdings hält der Alte Kontinent auch einige Dividenden-Perlen bereit.
Daher freue ich mich sehr, meinen langjährigen Twitter-Begleiter European Dividend Growth Investor für einen Gastartikel zu seinen favorisierten Dividenden-Aktien aus Europa gewonnen zu haben.
Viel Spaß also beim ersten englischsprachigen Gastbeitrag auf Jung in Rente.
Ein Gastbeitrag von European Dividend Growth Investor.
Let’s briefly introduce myself first: I’m European Dividend Growth Investor and I started my investing journey back in 2014. I’m Dutch by heritage, but I am already living in Poland for quite some time.
It is my goal to retire before I turn 50 by living off the income from dividend stocks.
In this post I will briefly explain why I chose dividend growth investing and I will share with you 4 European dividend stocks which I currently find attractively valued.
Why I Invest in Dividend Growth Stocks
It is important to understand the awakening I had back in early 2014 when answering this question. It was my main trigger to start looking for an investing approach that fits my style.
So, let’s get started.
I deeply believe that our pension systems are broken and that we need to take matters in our own hands.
And this is no secret, the evidence is readily available and literally in front of our eyes:
My retirement age is probably 2050 at an age of around 70 years old. At the same time, average life for a European male who’s born in the 80’s is 78 years old.
This means that I would only have 8 years to enjoy a working-free life. It’s not making me too happy when thinking about this.
At the same time, we shouldn’t count on having too much money during our retirements. We have literally been paying the bills for the 2008 financial crisis, because since then, we have seen an enormous transfer of wealth in society.
Just have a look at the below 12-year growth track record from the biggest pension fund in the Netherlands:
I realize it’s in Dutch, but what you can read here is that the pension fund only increased the pensions one time with a meager 0.28%. At the same time, you can see their “indexation-ambition” which is closely linked to inflation. In the same period, we saw an inflation of about 19%.
This effectively means that you’re only getting 800 Euros in retirement for the 1000 Euros that you were promised back in 2008.
As you can imagine, that does not look promising for our generation.
I have noticed that our governments are in denial about this or at least not taking the side of the working class with their policies.
Hence, there is just one thing left for us to do: take matters in our own hands.
And this is what I started doing.
Back in 2014 I wasn’t aware at all with all the kinds of investing opportunities and strategies out there. What I did know is that I have an aversion for risk and a fear for losing money. I work hard for it, so I definitely don’t want to squander it around.
That’s why I quickly fell in love with Dividend Growth Investing and Value Investing.
Buying undervalued stocks with increasing annual dividends was music to my heart. I felt like Christopher Columbus by discovering this strategy.
Isn’t it great that we can receive real cash in annual income from the investments that we make?
When I realized this, I quickly discovered the whole FIRE movement as well.
This got me convinced that I want to invest in dividend growing stocks with the goal to cover my expenses with dividends. If I reach that expense-coverage point, then I can effectively call myself retired.
But this investing style is not for everyone.
I have chosen to invest in individual dividend growth stocks, because it nurtures my analytical mind and it feeds my curiosity.
If you rather prefer to not spend too much time on your investments, then it might be better to choose a dividend growth ETF.
However, don’t be misled by their names please. Some of them perform really poorly and don’t provide you with actual dividend growth. If in doubt, check my article about how to find a good Dividend ETF and more.
If you are like me and you prefer to invest in individual dividend stocks, then you will often end up with a portfolio heavily weighted into American dividend growth stocks.
This is not needed, because there are some opportunities out there over here in Europe.
I agree, we have a poor culture when it comes to dividend growth companies. But this doesn’t mean that they don’t exist at all.
That’s why I will share with you today 4 European dividend growth companies which I currently find attractively valued. Most of these have histories dating back to the 19th century, so it just shows how resilient their business models have been so far.
Who doesn’t know Allianz (ETR:ALV)? I bet many of you have some insurance policies with them 😉
Allianz was founded in 1890 and has grown into becoming one of the largest insurance and asset management companies in the world. Their main competitors are Axa, Generali and Zurich Insurance.
I like the insurance sector a lot right now, because I find this sector quite undervalued compared to other sectors. The sector as a whole has a current Price/Earnings ratio of 12.5.
Allianz itself has a P/E of 13 which is slightly above the industry average, but for that you get a lot of quality in return.
The quality of this company is also evidenced by its strong balance sheet. Moody’s has rewarded the company with an Aa3 credit rating. This ensures that Allianz can keep borrowing money at attractive interest rates.
Allianz currently yields 4.5% with a payout ratio of 60%. It decided not to hike their dividend this year in light of the Covid-19 pandemic. I’m generally OK with this and I expect them to return to dividend growth once we have this pandemic behind us.
The company has not cut their dividend since 2008 and grown their dividends ever since with a 5-year CAGR of 5.63%.
You can still collect the dividend of €9.60 per share if you decide to become a shareholder before 5 May.
People that know me already are probably not surprised that I am bringing up Ahold Delhaize right now. I was really impressed with their most recent annual report and a dividend hike from 76 to 90 Euro cents.
However, I can imagine that you are not familiar with Ahold yet, because this consumer staple is mainly known in the Benelux. The company is the Dutch equivalent of Walmart and owns several iconic Dutch brands like Albert Heijn, Gall & Gall and Bol.com (the Dutch version of Amazon).
But that’s not it. They also earn half of their revenues from the United States, especially via their Food Lion brand along the East Coast.
However, it’s good to know that this brought them also into trouble back in 2002. The board of directors were definitely cooking the books at the time by overstating their revenues. This has been proven and the directors were prosecuted.
You can imagine that this had quite an impact on their earnings which led them also to cut their dividend.
Good news though, the company recovered from it and they have reinstated their dividends in 2007. Since then, they have been growing it very rapidly with a compounded annual growth rate of 9.7% over the last 5 years.
Ahold Delhaize is currently trading at a P/E ratio of 18 and a dividend yield of 3.87%.
Did you know that Europe has a great pharmaceutical industry? It’s one of those industries that we can be really proud of as Europeans and we’re definitely leading the pack here together with our American counterparts.
Companies like Novartis, Astrazeneca, Roche and Sanofi have had a significant impact on many people’s lives. Actually, some cancers can really be treated right now with a relatively high success rate. This is a result of their continuous quest for innovation in solving some of the biggest health challenges we are facing right now as humans.
This is why I wanted to select one of those companies right now that I find attractively valued as a dividend growth investor and that’s Sanofi.
Sanofi SA was officially founded in 1973 as a subsidiary of Elf, the oil company. Today the company is the 7th largest big pharma in the world by revenue.
It earns this revenue via blockbuster products like Dupixent, Lantus and Aubagio. As with every big pharma, some of their drugs are expiring in the upcoming years, hence they are investing a lot in their pipeline.
Unfortunately, they are not having a lot of luck, because their success rates leave enough room to improve.
This is in my opinion also one of the main reasons why their share price is trading at an attractive price. Investors simply want to see more prove that their pipeline will be generating a lot of revenue growth over the next decade.
I see this as an opportunity, because I feel that the pendulum has swung a bit too much to the other side.
Today you can own Sanofi at a Price/Earnings ratio of 8.6 and a dividend yield of 3.88%. Their latest dividend hike marked their 22nd consecutive dividend hike. However, it was “only” a meager 1.6% yield.
I don’t expect too much dividend growth in the upcoming years, so I treat Sanofi as a current income play. This is why I would personally prefer to own it every time the company trades above a 4% yield.
The shares go ex-dividend on 5 May.
Unilever ($AMS:UNA) has existed in its current form since 1929. In that year Unilever was formed after a merger between British soap maker Lever Brothers and Dutch Margarine Unie.
91 years later and Unilever is a world-leading consumer staple with many famous brands. Who doesn’t know Ben & Jerry ice creams, Axe deodorants, Dove shampoo and CIF cleaning liquids?
You can find many of their products in every household by just opening someone’s refrigerator or their sink base cabinet.
It just shows how strong their brand power is and this is good news for us as dividend growth investors. It usually means that they can keep on increasing their prices slightly above inflation.
Unilever is not alone though, because it has strong competition from Procter & Gamble and Nestle SA. However, I find Unilever the most attractively valued today compared to these two.
Unilever currently spots a forward Price/Earnings of 19 and a payout ratio of 65% based on the company’s underlying earnings per share. This means that the company still has some wiggle room to keep increasing their dividends even if earnings would stay flat.
Having said that, Unilever is really unique regarding their dividend growth track record. Did you know that Unilever could’ve had a dividend growth streak of 75 years? One of their former CEO’s decided to cut their dividend by 1 cent (2.1%) in 1966.
Since then, it has been growing their dividends ever since and most recently with a compounded annual growth rate of 5.08%.
You can get their shares today by buying them on the London Stock Exchange or on the Amsterdam Stock Exchange.
Unilever currently yields 3.64%.
That’s it from my side. I hope you enjoyed this post and that it inspired you with some stock ideas.
If you are interested in finding more of such companies then check out my article about 30 of the best European Dividend Aristocrats in 2021.
I am a big fan of David’s work and following his journey inspires me a lot. It’s been a great honor for me to write this article for you.
European Dividend Growth Investor
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