Cash dividends are important to build passive income streams

Great European Dividend Stocks to Buy in April 2022 (High-Yield)

European Dividend Stocks to Buy in April 2022 (High-Yield)

When building passive income streams, high dividend stocks are great. A dividend is when the company you invest in pays part of the profit they earned that year as cash to shareholders. It’s also possible for a company to not pay a dividend or pay very little dividend, instead opting to keep all the profits and reinvest them into its business. A company that pays high dividends is more likely to be a mature, stable company that will grow slowly, so your investment returns will generally come mostly in dividends but also from a slowly increasing stock price. 

When investing in companies that opt for low or no dividends, most of your returns will come from a rapidly increasing stock price rather than dividends. The difference for you as an investor is that if you invest in high dividend companies, you will get good amounts of cash paid to you every year, rather than if you invest in low/no dividend companies, where you’re giving up that constant stream of good cash pay-outs with the hope of selling your shares in the future for a very big profit.

TL;DR -> 3 Great European Dividend Stocks (High-Yield)

Market Cap

The market cap is the total value of the company. Basically, if you add the price of all the shares that shareholders throughout the world own, that is the market cap. In this article, we look at companies who have a market cap of at least 1B euros. The bigger a company, the easier it is to buy and sell shares at reasonable prices. Smaller companies might be illiquid, meaning that if you see the current price of shares online, you may have to spend more than that to buy the shares in practice, or receive lower than that when selling.

Payout Ratio

This is the percentage of a company’s yearly profits it is paying as a dividend to shareholders. The rest it will retain and reinvest in the company for further growth. In this article, we look at companies that are have a pay-out ratio below 100%. A ratio above 100% means that the company is paying more in dividends than it is even earning, which could be unsustainable. Also, the dividends and earnings used for each company are a forecast for next financial year’s dividends and earnings (2022).

Dividend Yield

This is the your expected investment return from dividends alone, basically the dividend as a percentage of the share price. If, for example, the dividend yield is 5%, That means you will receive 5 euros for every 100 euros you have invested, paid in cash per year. Again, we use 2022’s forecasted dividends to calculate this.

Earnings and Revenue Growth

Another criteria we’re looking at is that the average growth in sales and profits should be positive, as we would prefer avoiding declining companies. With declining companies, you may receive nice dividends now but the stock price may fall and so may the dividends in the future. It’s useless having European dividend stocks that are high-yield if the dividends may not be there in the future.

Dividend yield of 6.7%, pay-out ratio of 63% and a market cap of 28B euros. Orange is a French telecom operator, operating mostly in France and some European countries, with some sales coming from Africa and the middle east too. A telecom offers mobile, phone and internet connectivity to retail customers as well as businesses. 

Orange have a very safe business model because customers regularly need to keep consuming Orange’s services forever, they’re unlikely to switch provider once they have a reliable one, and most importantly the huge cost of competing with Orange. A telecom has to have a large amount of towers and facilities to enable the services they offer to customers, so it wouldn’t make sense for a competitor to spend lots of money to replicate this infrastructure to try and compete in a stable market that is already served well.

European Dividend Stock: Orange, a high yield telecom company

Dividend yield of 6.4%, pay-out ratio of 55% and a market cap of 60B euros. AXA is a French insurance company, operating mostly in France and Europe with some worldwide exposure. Insurance companies tend to be very stable. Insurance is not something that will go away anytime soon as risk management is vital for customers. 

AXA’s scale makes it difficult to compete with them cost wise, and much business comes via brokers, so it’s hard for even the tech start-ups to compete, as customers want that personal touch from a broker they’ve trusted forever. What’s more, seeing that we’re going into a higher interest rate environment, this tends to be positive for insurers. This is because they make part of their earnings by investing the premium that customers pay until they have to pay claims in the future, so higher interest rates mean more investment returns.

AXA - a French insurer that will pay you high dividends

Dividend yield of 7.5%, pay-out ratio of 35% and a market cap of 50B euros. BMW has a brand everyone knows about. The automotive industry has been going through a really hard time. Inflation in commodity prices has been pushing up fuel costs for customers and production costs of the cars. There’s been a big shortage till today of semiconductors, which are necessary for their cars, meaning that they can’t produce as much as necessary to keep up with demand. 

Even with all these negative points, they’re still expected to pay a very high dividend yield with a low pay-out ratio. On top of this, you’d expect a strong brand like BMW to benefit even more when market conditions normalize. It seems like the only way is up in the long run.

BMW, a strong brand in the auto industry

Are dividend stocks not exactly what you’re looking for? Would you prefer long term growth ideas? Why not check out our stock ideas page?

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Any views or opinions presented in this article are personal and shouldn’t be taken/used as professional advice as we are not qualified financial advisors.
Should an individual wish to obtain more information about the above article then they should seek expert advice from independent financial advisors. 
Any statistics mentioned have all been linked to their respective documents together with their ownership, and have been obtained directly from  publicly available information such as – investor presentations, annual reports and calls published by the companies in question. 

Lastly, we would like to note that this article has no tie to our professional jobs and was conducted in our free time.

The investmenthub seeks not to influence a decision made by any potential investors and will not be held liable to any decisions taken on from their end. As previously stated the above information is not expert information, and therefore any individual who seeks further awareness or answers must seek expert advice from independent financial advisors here locally or abroad. 

WARNING! : Investing in equities is high risk, which may result in a total loss of the investment made, plus any additional costs that are incurred with making the investment. We once again advise you that the information above is not financial an advisory service.