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European companies are often overlooked for dividend growth stocks. However, Europe is home to some of the top international companies in the world. Luckily for dividend growth investors, some of these companies have been distributing and increasing their dividends for over two decades or more. While I could have picked a lot more companies, here is a list of 6 I will be watching in the first half of 2022
- Nestle
- Unilever
- Novartis
- British American Tobabco
- Fresenius
- Sanofi
For full disclosure, I am long in Unilever, BATS and Fresenius
1. Nestle
(SIX: NESN)
Our first company on the list of 10 European dividend stocks to consider is Nestle. Headquartered in Vevey, Vaud, Switzerland, Nestle is one of the world’s largest food and beverage companies. Nestle owns over 2,000 brands, including Kit Kat, Nescafe coffee, and Haagen-Dazs ice cream. Nearly thirty of Nestle products have earned over CHF 1 billion.
In 2020, Nestle made CHF 84.3 billion in sales through seven business units. During the first nine months of 2021, they have seen Organic sales growth of 7.6% due to broad-based development and market share gains across most geographic regions. The company also updated its guidance and expected earnings per share to increase.
It’s heartening to see that both earnings and cash flow cover Nestlé’s dividend. The firm has delivered a dividend to shareholders since 1959. For the past twenty-five years, it has increased its dividend, including a 1.8% increase to 2.75 CHF for 2020. The board is expected to announce a dividend payment for 2021 at its 155th A.G.M. on 7th April 2022. I am expecting a 2% increase for a 2.80 CHF dividend.
Interestingly, the company reduced its stake in L’Oreal by selling 22 million shares for around €9 Billion. At the same time, the company announced a new CHF 20 Billion shares buyback program.
The company remains an attractive investment opportunity thanks mainly to its diversified and robust portfolio of brands and its commitment to rewarding shareholders.
https://www.buymeacoffee.com/dividendtalk
Next Dividend Pay Date: 21st April 2022 (Estimated) Annual Dividend per share: CHF 2.75. Dividend Yield 2.25%
2. Unilever
(LSE: ULVR, Euronext: UNA, NYSE: UL)
Unilever plc is a consumer staples multinational that creates some of the most popular consumer goods globally. Headquartered in London, United Kingdom, Unilever is registered on the NYSE, London Stock Exchange, and Euronext Amsterdam.
Unilever has more than 400 brands and with 14 of the top 50 consumer goods brands, there is a high chance you have some of Unilever’s products at home. Incredibly 13 of the brands are valued at over 1 billion euros in annual sales.
During the first 9 months of 2021, the company saw 4.4% in sales growth and is in line to reach its 5% target at the end of the year. A look at the 10 of the company’s financials shows the company growing Revenues, Earnings per Share, and Free cash flow. As a European dividend growth investor, these types of companies help me sleep well at night.
The company is trying to transform away from its typical mature slower growth business to focus on higher-growth brands. Selling its Tea business to ekaterra for €4.5 billion is the first step in Unilever’s portfolio “rationalization“.
Our Strategy here is quiet clear. We will continue to evolve our portfolio towards higher growth segments in home care, beauty, personal care and foods.
Alan Jope
The company is one of the more reliable European dividend growth stocks and has a solid dividend history since 1999. The company has committed to long-term value creation by driving earnings and cash flow growth with a growing dividend.
Next Dividend Pay Date: 22nd March 2022 Annual Dividend per share: £1.44 Dividend Yield 3.66%
3. Novartis
(SIX: NOVN, 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).
Novartis has an impressive dividend history which saw a 9.8% growth rate in USD between 1996 and 2020. The company is confident in a 4% sales CAGR through 2026 and expects 9 Billion from new generic entries from their pipeline.
The company is embracing the 21st century and is harnessing the power of data science and AI to fuel long-term growth. As part of this strategy, Novartis has partnered with companies such as Microsoft and Amazon. I would also encourage you to check out the companys’ R&D presentation released in December 2021 which demonstrates the companies strong pipeline – https://www.novartis.com/sites/novartis_com/files/novartis-r-d-day-2021-presentation.pdf
Novartis has increased its dividend for the last 24 years and is expected to announce its 25th increase on the 2nd of February, Making it one of the more consistent European dividend growth stocks. My guess is that it will increase to CHF 3.05
Next Dividend Pay Date: March 2022 Annual Dividend per share: 3.00 CHF Dividend Yield 3.64%
4. British American Tobacco
(LSE: BATS, NYSE: BTI)
British American Tobacco is one of the major tobacco companies globally, with operations in over 180 countries. Outside of the United States, Dunhill, Pall Mall, and Rothman’s drive cigarette sales. The U.S. signifies 40% of the global industry’s value where they hold brands such as Newport and Camel due to its acquisition of Reynolds American in 2017.
The global tobacco industry has been declining in developed countries for some time. This trend will continue in 2022, with an estimated 3% volume decrease in the U.S.A. BATS focuses more on emerging markets than some of its competitors to offset this decline. British American Tobacco aims to accelerate revenue growth from its New Categories segment with non-combustible products such as vapor and T.H.P.
Since the start of the millennium, the BATs has had a long-established history of dividend payments with a 5-year CAGR of 5.99%. While regulation risks always persist, A high dividend yield of over 7% with strong cash flow creation, and a commitment to a 65% payout ratio are positive for serious income investors. The only caveat with this company is that it has been dropping in price since its ATH in 2017.
Next Dividend Pay Date: 9th Feb 2022 Annual Dividend per share: £2.16 Dividend Yield 7.4%
5. Fresenius
German-based Fresenius SE is a global healthcare group that offers almost all aspects of healthcare, from treatments to hospitals. The Fresenius Group includes four individually operating business sectors. 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. Europe is the largest market with 44% sales, while North America earns 41%. Through bolt-on acquisitions, future growth can be achieved while also targeting emerging markets, including China
Fresenius has a very cautious dividend policy and aims to maintain a 20 and 25% payout ratio based on earnings per share. Nevertheless, the company has grown its dividend for the last 28 years with a 15% CAGR. This European dividend aristocrat should continue increasing its dividend if they maintain the 5% – 7% earnings growth it expects.
Next Dividend Pay Date: 27th May 2022 (estimated) Annual Dividend per share: €0.88 Dividend Yield 2.40%
6. Sanofi
The last company on the list of European dividend stocks to consider is Sanofi. Sanofi is a French healthcare company that offers healthcare products in 170 countries worldwide. The company has three core business segments called. Specialty Care, Vaccines, and General Medicines. Sanofi was once known for diabetes drugs such as Lantus, however, in recent times it has shifted its attention to high growing drivers such as Dupixent, which treats dermatitis, and vaccines.
Dupixent has now become Sanofis’s number one product with a 74% increase in sales. Vaccines expect to deliver a high single-digit net sales CAGR through 2025 and the current pandemic can only help the company meet these targets.
Sanofi had a solid 2020 where Sales grew by 3.3% to €36 billion, and EPS grew by 3.9%. The company imagines this trend will resume in the full-year results due on the 4th February 2022 and has given high single-digit growth guidance in 2021
The company currently has a net debt of 1.80 times its EBITDA and an interest coverage ratio of over 12. Sanofi’s free cash flow has increased by 71% since F.Y. 2018 to €7 billion.
Robust free cash flow generation and revenue growth have allowed this European dividend aristocrat to increase its dividend for 27 straight years. I expect the company to increase the dividend again which will be due in May 2022.
Next Dividend Pay Date: 2th May 2022 (estimated) Annual Dividend per share: €3.20 Dividend Yield 3.56%
The Bottom Line
So there you have 6 companies I will be watching in 2022. There are a few more companies That I could have added to this list but I will keep them for a later post.
Let me know in the comments below what companies you will be watching this year.
If you would like a copy of the template I use to perform fundamental analysis then feel free to grab your copy below. I explain how I use the template here!
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