In general, Dividend Aristocrats are the foundation for the portfolios of most serious dividend growth investors. European Dividend aristocrats are typically blue-chip stocks that have proven to reward shareholders with rising dividends over a long period. While historic dividend payment does not guarantee future distributions, it can help investors when accessing the likelihood of a company continuing to reward shareholders.
How Do European Dividend Aristocrats Make The List?
Dividend aristocrats are defined differently in Europe and the United States. Indeed, European companies qualify as dividend aristocrats under the following conditions:
- Needs to be an S&P Europe 350 Index member
- Ten consecutive years of increasing dividends
- Possess a float-adjusted market capitalization of at least US$ 3 billion
- Has a median daily trading volume of at least US$ 5 million
Ten years is much less than the 25 years required by companies in the S&P 500. However, this is because European companies do not value the dividend in the same manner as American companies. Typically, European companies tend to have a more conservative approach to rewarding shareholders with dividends.
Another significant difference is that European companies like to have an FCF payout ratio of between 40% and 60%. Actually, it is a rare event that you would see a European company with an FCF payout ratio above 70%. Also, from a dividend longevity point of view, this conservative approach might improve the sustainability of the dividend. Still, it also means that it will more than likely cut the dividend when a company hits a slight downturn.
As an investor, this also means that you see a European company with a long track record of paying dividends. And, you can be almost certain that revenue and FCF are also growing.
Related read: How Safe is Your Dividend?
Top 15 European Dividend Aristocrats
The following 15 companies qualify as European dividend aristocrats and are among the most dependable stocks for reliable dividends. For simplicity, I’ve offered the stocks and ADRs listed on American exchanges, i.e. NYSE, Nasdaq, OTC.
15. L’Oreal SA (OTCMKTS:LRLCY)
L’Oréal SA. is one of the world’s largest cosmetic companies and is better known as the company behind personal healthcare and grooming brands such as Maybelline, Urban Decay, Diesel, Vichy, and La Roche-Posay.
The company generated €28 billion in revenue within four business divisions, Consumer Products (41.8% of sales), L’Oréal Luxe (36.4% of sales), Professional Products (11.1% of sales), and Active Cosmetics (10.8% of sales).
E-commerce sales have seen substantial growth during the pandemic, which helped offset over 50% of the losses caused by brick and mortar shops being closed. Further, L’Oréal expects this growth to continue post-pandemic and has predicted that 50% of revenue will come online by 2023.
L’Oréal is an excellent example of a European company with a strong brand. Indeed, this European Dividend Aristocrat prioritizes a healthy, growing dividend as they have not cut their dividend in 32 years. Also, the company also offers a 10% extra dividend for registered investors who hold their shares for at least four years.
Current Dividend Yield 1.10%
14. Enagas SA (OTCMKTS:ENGGY)
For Investors looking for international exposure, Enagas considers partnership agreements with leading firms such as Tallgrass Energy in the U.S. to help them grow internationally. Also, the company has a significant stake in the Trans Adriatic Pipeline (TAP), which carries natural gas supplies to Europe from Azerbaijan.
Enagas deserves attention from any investor serious about boosting their earning potential through dividends, as the company has consistently approved higher yielding dividends for its stockholders. Further, the company’s forward dividend is currently $1.01, which represents a potential 9.35% yield.
This European Dividend Aristocrat has paid a Bi-annual dividend since 2003. It is rare for a European company to commit to growing its dividend. However, due to its predictable nature, it has committed to maintaining a sustainable dividend of €1.74 by 2026.
Current Dividend Yield 9.35%
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13. Nestle SA (OTCMKTS:NSRGY)
Nestle, headquartered in Vevey, Vaud, Switzerland, is one of the world’s largest food and beverage companies. Also, they own more than 2,000 brands, including Kit Kat, Vittel, Nesquik, Nescafe coffee, and Häagen-Dazs ice cream. Over twenty-nine of Nestle products, or brands, have grossed over 1 billion CHF.
In 2020, Nestle generated CHF 84.3 billion in sales across seven business segments, including powered and liquid beverages, nutrition and health science, pet care, prepared dishes, Milk products, confectionery, and water. The company can achieve future organic growth by further investment in higher-growth categories such as coffee, nutrition, and Nestlé Health Sciences.
It’s encouraging to see that both earnings and cash flow cover Nestlé’s dividend. The company has distributed a dividend to shareholders since 1959. It has increased it for the past 25 years, including a 1.8% increase to 2.75 CHF for 2020.
This European Dividend Aristocrat remains an attractive investment opportunity thanks mainly to its diversified and robust portfolio of brands and its commitment to rewarding shareholders.
Current Dividend Yield 2.39%
12. Unilever (NYSE:UL)
Unilever plc is a consumer staples conglomerate that produces some of the most popular consumer goods globally. Headquartered in London, United Kingdom, Unilever is listed on the NYSE, London Stock Exchange, and Euronext Amsterdam. Moreover, the company has recently unified its corporate governance under Unilever Group, combining Unilever NV and Unilever PLC on 29th November 2020.
Unilever has more than 400 brands, including Vaseline, CIF, Domestos, Knorr, and Dove, found in over 190 distinct markets. Also, the company owns 14 of the top 50 consumer goods brands, where 13 of the brands do over 1 billion euros in annual sales.
This European Dividend Aristocrat has a strong dividend history and has paid a dividend since 1999. Further, it has committed to long-term value creation by driving earnings and cash flow growth with a growing dividend.
Current Dividend Yield 3.37%
Related read: 15 Dividend Kings With 50+ Years Of Dividend Growth
11. Roche AG (OTCMKTS:RHHBY)
Roche is a research-based healthcare company, and a favorite among retirees, with medicines in oncology, immunology, infectious diseases, and the central nervous system’s diseases. They are also the world leader in in-vitro diagnostics and tissue-based cancer diagnostics and a frontrunner in diabetes management. For this reason, it’s no wonder Roche is a top holding within many international ETFs.
Headquartered in Switzerland, Roche has two distinct operating divisions; Pharmaceuticals and Diagnostics. This European Dividend Aristocrat combines both the pharmaceutical and diagnostic divisions to bring personalized healthcare treatment to each individual.
In 2020, the company reported revenues of approximately 58.3 Billion CHF. Further, 2018 also marked the 34th consecutive year that the firm increased its dividend, making it one of the few companies and true aristocrats with such a pedigree.
Current Dividend Yield 2.51%
10. Novartis (NYSE:NVS)
Novartis International AG, better known simply as Novartis, is the first pharmaceutical-focused company to make this list. The Swiss-based company is one of the industry leaders in mature drug manufacturing known for best-selling drugs Cosentyx (arthritis) and Entresto (heart failure).
In recent times, the company has been moving towards cutting-edge gene therapies. Zolgensma, which treats spinal muscular atrophy, saw strong growth in 2020 Q4 and is starting to have a meaningful impact on revenue, generating 0.9 billion in 2020.
Novartis has not experienced cash flow disruptions during 2020, generating 11.7 billion in free cash flow in 2020, which is more than enough to sustain the 7.0 billion annual dividend payment. Further, this European dividend aristocrat approved its 24th consecutive dividend increase, with a rise of 1.7% to 3.00 CHF per share for 2020.
Novartis’ current dividend yield is around 3.49% and is an excellent option for shareholders looking for a high dividend yield and a long history of a growing dividend.
Current Dividend Yield 3.49%
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9. Ashtead (OTCMKTS:ASHTY)
Ashtead Group is a U.K.-based equipment rental company aiming to create value through the short-term rental of its equipment to customers for use in building projects, entertainment and facilities maintenance. Also, they are the most significant player in a competitive U.K. market, with only an 8% market share. However, Investors looking for exposure to North America might find Ashtead attractive as the U.S. continues to be the company’s largest market.
Further, this European Dividend Aristocrat is financially architected to prioritize the rental market in the United States as it is seven times bigger than the U.K. rental Market. While Canada is a new market for the company, they predict this will be the fastest-growing market with revenue growth of up to 6% in 2021 and 2022. The company’s main growth driver remains organic investment, and Ashtead invested £453m in 18 bolt-on acquisitions in the U.S. and Canada.
Ashtead has a progressive dividend policy to increase the dividend when profits and cash generation increase and maintain the dividend when profits decline. Impressively, the company earns its European dividend aristocrat status by increasing its dividend for 16 years. And, given the size of the U.S. market and the predicted growth in the Canadian market, Investors can expect Ashtead to continue increasing the dividend in the future.
Current Dividend Yield 0.69%
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8. British American Tobacco PLC (NYSE:BTI)
British American Tobacco is one of the prominent tobacco companies globally, with operations in over 180 countries. Outside of the United States, brands such as Dunhill, Pall Mall, and Rothman’s drive cigarette sales. Indeed, the U.S. represents 40% of the global industry’s value where they own brands such as Newport and Camel through the acquisition of Reynolds American in 2017.
The global tobacco industry has declined in developed countries for some time. Moreover, analysts expect this trend to continue in 2021, with an estimated 3% volume decrease in the U.S. to help offset this decline. BAT is notable for its presence in emerging markets. Also, they also aim to accelerate revenue growth from its New Categories segment with non-combustible products such as vapor and THP.
In 2020, this European Dividend Aristocrat generated £7.3 billion in free cash flow. The FCF payout ratio was a little over 50% in 2020, which is in line with its dividend policy of paying out roughly 65%.
Since the start of the millennium, the company has a long-established history of dividend payments with a 5-year CAGR of 5.99%. And, while risks of regulation always persist, a high dividend yield of over 7%, strong cash flow generation, and a commitment to a 65% payout ratio are encouraging for serious income investors.
Current Dividend Yield 7.93%
7. Coloplast A/S (OTCMKTS:CLPBY)
Coloplast is a Danish medical device company and a worldwide leader in Ostomy and Continence Care. The company also holds a substantial market share in Wound & Skin Care and Interventional Urology.
Coloplast is aiming to build a consumer healthcare company of the future. Indeed, through Coloplast Care & Direct to Consumer, the company is now present in over 30 countries with a consumer setup. And, with over two million customers in its database and direct distribution in five of its largest markets, Coloplast maintained service levels throughout the COVID-19 crisis.
60% of revenue comes from the European markets, 25% from other developed markets, and 15% from emerging markets. However, emerging markets saw organic growth of 8% in 2020 compared to 2% in Europe.
Under the companies’ Strive25 strategy, the company aims for 7% organic growth and an EBIT margin above 30%. Interestingly, Coloplast has increased its dividend for 24 consecutive years, making it one of the longest European dividend aristocrats. The company has a dividend policy to distribute excess liquidity to the shareholders through dividends and share buy-backs which means that they typically have a high payout ratio.
Current Dividend Yield 1.68%
6. Diageo (NYSE:DEO)
Founded in 1997, Diageo is a multinational alcoholic beverage company from the U.K. which employs over 27,000 people. The company is home to 23 of the world’s top alcoholic brands and 2 of the top 5 brands globally. The most popular brands are Johnnie Walker whisky, Smirnoff vodka, Baileys liqueur, Captain Morgan rum, Tanqueray gin, and Guinness. These six brands alone drive over £16 Billion in revenue or 40% of all Diageo’s revenue.
2020 turned out to be a tricky year for the company as lockdowns caused declines in organic net sales. However, tequila, Whiskey, and ready-to-drink options helped to offset some of the losses.
Diageo targets India and China to drive future growth and has also taken a step into the non-alcoholic world by acquiring a stake in Seedlip, the world’s first distilled non-alcoholic spirits brand.
2021 has proved to be a better year for Diageo, with e-commerce sales increasing. A 2% hike in the interim dividend delighted investors, continuing this European dividend aristocrats’ 12-year streak for growing dividends. The company has been distributing dividends since 1998, with the only dividend cut coming in 2008 by 5%.
With the companies’ strong brand power, lockdowns easing, and the growing trend in e-commerce, Diageo could be an outstanding option for investors looking for a quality company.
Current Dividend Yield 1.99%
5. Fresenius Medical Care AG & Co. (NYSE:FMS)
Fresenius SE is a german-based global healthcare group that offers dialysis, hospitals, and outpatient treatment services. The Fresenius Group includes four independently operating business segments. Also, the company has a 32% stake in Fresenius Medical Care ( 49% of sales), treating chronic kidney failure patients. Fresenius Helios ( 27% of sales) is the largest European private hospital operator. Fresenius Kabi (19% of sales) supplies drugs, clinical nutrition products, medical devices, and services to help critically and chronically ill patients. In comparison, Fresenius Vamed (5% of sales) plans, develops and manages healthcare facilities.
The company generated €36.3 billion in sales in F.Y. 2020. Also, Europe is the largest market with 44% of sales while North America earns 41% of sales. Indeed, future growth can be achieved through bolt-on acquisitions while also targeting emerging markets, including China.
Fresenius has a very conservative dividend policy and aims to maintain a payout ratio of between 20 and 25% based on earnings per share. The company has grown its dividend for the last 27 years, and this European dividend aristocrat should continue this tradition if they maintain the 5% – 7% earnings growth it expects.
Current Dividend Yield 2.03%
4. Kerry Group (OTCMKTS:KRYAY)
Kerry Group is a global company from Ireland that manufactures specialty ingredients to improve packaged foods. For example, the company has two operating segments, taste and nutrition generate 90% of trading profit, and Consumer foods cause the remaining 10%.
This European Dividend Aristocrats’ global footprint has improved with the acquisitions of Tecnispice, S.A. in Guatemala, Bio-K Plus International Inc. in Canada, and Jining Nature Group in China completed during the year for a total consideration of €280m.
The company reported a trading profit of €797.2m down from €902.7m in 2019, reflecting lower volumes in Taste & Nutrition and COVID‐related costs. Since 1986, Kerry group’s revenue has grown at a CAGR of 9%, while the dividend has grown at a compound rate of 17%.
In 2020, Kerry Group paid an interim dividend of 25.9 cents/share, which increased 10.2%. The company paid a final dividend of 60.6 cents/share on 14th May 2021.
The Kerry Group could be suitable for Investors who are focused on dividend growth as the company aims to grow the dividend by double digits each year.
Current Dividend Yield 0.73%
3. Luxottica (OTCMKTS:ESLOY)
Luxottica is an Italian eyewear corporation based in Milan. The company accounts for over 25% of the global value sales of eyewear after the Luxottica merger with Essilor in 2018. Indeed, Luxottica offers sunglasses and prescription frames within their manufacturing and retail distribution segments.
EssilorLuxottica has over 9,000 retail locations worldwide where they sell well-known brands such as Ray-Ban, Persol, and Oakley. 2020 was pivotal for EssilorLuxottica delivering solid performances in strategic countries like the U.S., China, and Australia, where products like Eyezen for Connected life and Blue Cut protection saw double-digit growth. Further, e-commerce saw a 40% increase and now represents 8% of the companies’ revenue at €1.2 Billion.
The business has a solid balance sheet with a net debt to EBITDA ratio of just over 1. Free cash flow for 2020 was €1.8 billion for the full year 2020, just above 2019 levels despite currency headwinds.
This European Dividend Aristocrat has a long dividend history spanning over two decades. Moreover, the company paid its dividend of €1.08 per share at its AGM in May. The final dividend will come on top of the interim dividend paid in December 2020, leading to a total dividend of €2.23 per share.
Current Dividend Yield 0.73%
2. Sanofi (NASDAQ:SNY)
Sanofi is a French healthcare company that provides healthcare solutions in 170 countries worldwide. The company has three core business units. Specialty Care, Vaccines, and General Medicines. Better known for it, diabetes drugs such as Lantus, Sanofi have shifted focus to high growth drivers such as Dupixent, which treats dermatitis and vaccines.
Dupixent is now Sanofis’s number one product with a 74% increase in sales, while vaccines expect to deliver a mid-to-high single-digit net sales CAGR from 2018 to 2025.
Sanofi had a strong 2020 where Sales increased by 3.3% to €36 billion, and EPS grew by 3.9%. The company believes this trend will resume and has given high single-digit growth guidance in 2021. Also, it has a net debt of 1.80 times its EBITDA and an interest coverage ratio of over 12. Sanofi’s free cash flow has grown by 71% since F.Y. 2018 to €7 billion.
Strong free cash flow generation and revenue growth have allowed this European dividend aristocrat to increase its dividend for 27 straight years.
Current Dividend Yield 3.77%
1. Wolters Kluwer N V (OTCMKTS:WTKWY)
Founded in 1863, Kluwer NV originally started as a bookstore and publishing company. It became Wolters Kluwer NV in 1987 when Wolters-Samson and Kluwer merged. The company is known for high-quality informational databases and software solutions where 93% of fortune 500 companies are using their information services.
Wolter Kluwer focuses on four segments which generated €4.6Billion in F.Y. 2020. Health (26% of revenue), Tax & Accounting (31% of revenue), Governance, Risk & Compliance (23% of revenue) and Legal & Regulatory (20% of revenue). Since 2003, they have been re-investing 8%-10% of revenues in developing new products. Further, the companies’ business model is subscription-based, where recurring revenue is 80% of total revenue.
Wolters Kluwer has an outstanding dividend growth track record of 34 years, where they increased it every year except for a brief period between 2002 and 2005. Moreover, the company has a solid commitment to its dividend and has stated on its annual report that they aim to increase it every year.
The ten-year CAGR for free cash flow is above 8%, which is in line with dividend growth. Further, cash flow is essential as the company usually pays out 50% of free cash flow in dividends. So, as long as the free cash flow increases, investors can expect the dividend to grow in lockstep.
Current Dividend Yield 1.53%
The European Dividend Aristocrats listed in this article are among the best that one can use to diversify a portfolio. As usual, we recommend investing with the advice of a financial or investment advisor. While we’ve done our best to ensure accuracy as of the market close, July 20, 2021, all details including the data, tickers, dividend yields, come from Yahoo Finance, and should always be verified before making any purchase.
This article originally appeared on The Financially Independent Millennial and was republished with permission.
Derek English is an entrepreneur, investor, blogger, and podcast co-host on personal finance. His passion is to teach his kids to be financially free and to live life on their own terms.