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All Contents © 2018The Kiplinger Washington Editors
By Lisa Springer, Contributing Writer
| July 18, 2018
Most income investors are already familiar with the S&P 500 Dividend Aristocrats, a group of 53 American companies that have increased dividends at least 25 years in a row. As a group, these have been solid holdings for long-term investors, outperforming both the Standard & Poor’s 500-stock index and the Dow Jones Industrial Average over the past decade.
But they’re not the only dividend royalty on the planet. Far from it.
There’s also a collection of 39 stocks across the pond that have earned the title of European Dividend Aristocrats. These don’t have quite the same dividend longevity of their American counterparts, with the index requiring a minimum of just 10 consecutive increases to their annual payouts. But they do have a leg up on the U.S. Aristocrats – they tend to yield more, offering 3% as a group versus just 2.5% for the American Aristocrats.
Here’s a look at each of these lesser-known (but still very dependable) European Dividend Aristocrats:
Data is as of July 16, 2018. Stocks were members of the S&P Europe 350 Dividend Aristocrat index as of July 11, 2018. Companies listed in alphabetical order. Yields represent the trailing 12-month yield, which is a standard measure for international stocks. Dividends on some international stocks may be taxed at a higher rate; however, the IRS offers a foreign tax credit that investors can use to offset taxes collected by foreign governments.
Market value: $15.3 billion
Dividend yield: 1.2%
Consecutive annual dividend increases: 14
U.K.-based Ashtead Group (ASHTY, $125.75) is a major player in the U.K. and American rental equipment markets. Ashtead leases construction and industrial equipment to customers that use its machines for road building, facilities management, climate control, special events and disaster relief.
The company’s Sunbelt division is the second largest equipment rental firm in the U.S., with 712 locations nationwide. Its A-Plant division operates from 187 rental locations in the U.K. and is that country’s largest equipment renter.
The majority of Ashtead’s growth comes from the states. Last year, the company invested $1 billion in its U.S. equipment fleet and spent $476 million to open 73 new Sunbelt locations. Another 60 locations will open this year.
The company pays dividends semi-annually, and five-year dividend growth has averaged an impressive 45% annually.
Courtesy Alexandre Dulaunoy via Wikimedia Commons
Market value: $25.5 billion
Dividend yield: 1.7%
Consecutive annual dividend increases: 18
Associated British Foods (ASBFY, $32.56) is a multinational food processor and retailer operating in 50 countries. Americans may be familiar with a few of its brands, including Ovaltine hot chocolate, Twinings teas, Mazola corn oil and Kingsmill bread. ABF also owns the Primark clothing brand and a chain of 350 Primark retail stores across Europe and North America.
ABF’s two largest businesses are grocery and sugar, but operations in agriculture, baking ingredients and retail also contributed to sales growth. The company’s earnings per share improved 20% last year as a result of higher European Union sugar prices, reduced expenses in the bakery and special ingredients businesses, and the opening of 30 new Primark stores. Europe is lifting quotas on sugar this year, which should provide further boost to the company’s sugar operations.
Associated British Foods has improved its dividend by an average of 7.4% annually over the past five years, including a 12% hike in 2017 to 41 pence (roughly 54 cents).
Market value: $28.8 billion
Dividend yield: 3.2%
BAE Systems (BAESY, $36.25) is one of the world’s largest defense contractors, serving government customers mainly in the U.K. and U.S. The company designs and manufactures military aircraft, land vehicles and surface ships and is expanding its capabilities in cyber security and intelligence.
One of the company’s largest contracts is supplying electronic warfare systems for F-35 jet fighters – the world’s largest defense program. BAE also recently secured multibillion-dollar contracts to build Typhoon jets for Qatar and Saudi Arabia.
BAE believes its future growth will come from expanding internationally, as well as adjacent markets such as cyber security. The company’s most recent contract awards from the U.S. military include a $1.2 billion contract with the Marines for amphibious combat vehicles and a $484 million contract with the Army for missile warning systems.
Despite flat revenues last year, BAE was able to increase cash flow from operations by 54% and EPS by 8% while significantly reducing debt.
BAE’s dividend has improved for 14 consecutive years, though its progress has been slow, at just 2.4% annually over the past five years.
Market value: $115.1 billion
Dividend yield: 5.3%
Consecutive annual dividend increases: 20
British American Tobacco (BTI, $51.09) isn’t terribly well-known in the U.S., but it’s the world’s largest publicly traded tobacco company. BAT owns the popular Dunhill and Rothmans cigarette brands, which are sold to millions of consumers worldwide.
BAT paid $49.4 billion in 2017 to acquire U.S. competitor Reynolds American and a portfolio of brands that included Camel and Newport cigarettes, as well as Vype and Vuse e-cigarettes. BAT plans to begin marketing the acquired e-cigarette brands internationally.
Excluding the impact of the Reynolds acquisition, earnings per share rose by nearly 10% last year. BAT aims to deliver future EPS gains each year at high-single-digit levels. Earnings should receive a boost in 2018 from more than $400 million in anticipated acquisition-related synergies.
The last increase to the quarterly dividend on BTI’s stock was a 15.2% bump last year.
Courtesy Graham Richardson via Flickr
Market value: $10.4 billion
Dividend yield: 2.0%
Consecutive annual dividend increases: 25
Bunzl (BZLFY, $30.72) is an international distributor of food packaging, cleaning supplies, personal-protection equipment and other consumable items. The company serves customers from several industries, including foodservice, grocery, cleaning, retail and health care. Roughly 60% of sales come from North America, while Europe and the U.K. contribute another 35%.
Bunzl’s organic sales growth typically matches GDP growth and is supplemented by mergers and acquisitions. The company has closed more than 150 acquisitions since 2004, in the process expanding its operations from 12 to 30 countries. The markets Bunzl serves are highly fragmented, too, which provides it with many opportunities to expand its footprint and enter new markets via acquisitions.
The company’s dividend has increased for 25 years in a row, which would be enough to qualify even as an American Dividend Aristocrat. The company’s last hike to its semi-annual dividend was a 10% boost in 2017.
Courtesy Lost Parcels via Flickr
Market value: $21.9 billion
Dividend yield: 2.4%
Consecutive annual dividend increases: 22
Denmark’s Coloplast (CLPBY, $10.39) is the worldwide leader in ostomy and incontinence products and has an expanding presence in wound care, skincare and urology. Coloplast has the top market share for continence care and ostomy care products, the No. 4 share of the urology market and the No. 5 share of the wound and skincare market.
The markets served by Coloplast are growing 4%-5% annually thanks to a rising senior population. Coloplast generates 60% of its sales in Europe, 23% in other developed countries and 17% in emerging markets.
Over the past five years, Coloplast has produced 5.9% annual sales gains and 7.2% annual EPS growth, then turned that around and turned it into 8.5% dividend increases on average. Over the next few years, the company expects to generate 7%-9% annual sales growth by investing in new products, expanding Coloplast’s presence in the U.S. and emerging markets, and making bolt-on acquisitions.
Market value: $35.2 billion
Dividend yield: 2.1%
Consecutive annual dividend increases: 17
Compass Group (CMPGY, $22.24) is the world’s largest contract foodservice business. This British company operates in 50 countries worldwide, has more than 55,000 client locations and serves more than 5.5 billion meals each year.
Alphabet (GOOGL), Intel (INTC) and other large corporate customers account for 39% of Compass Group sales. Other important customers include health-care and senior-care facilities (23% of sales), as well as colleges and schools (18%). North America is the company’s primary market, representing 59% of sales, and Europe contributes 25%.
The foodservice industry is highly fragmented; regional players or in-house providers control about 75% of this £200 billion ($262 billion) market. Compass relies on M&A to grow as a result; the company allocates 3% of annual sales for bolt-on acquisitions.
The company’s 8.7% annual EPS growth rate is almost mirrored by its 8.6% dividend growth rate over the same time frame. The payout is made semi-annually.
Market value: $90.6 billion
Consecutive annual dividend increases: 19
Diageo (DEO, $146.81) is a multinational purveyor of beers and premium liquors that records sales in more than 180 countries. The company was formed in 1997 by the merger of Irish beermaker Guinness with U.K. liquor merchant Grand Metropolitan.
Diageo owns iconic liquor brands including Johnnie Walker, Crown Royal, J&B, Smirnoff, Captain Morgan, Baileys and Tanqueray. Roughly two-thirds of Diageo’s business is sales of premium liquor; the company owns two of the top five spirit brands (Johnnie Walker and Smirnoff) and 20 of the top 100 brands worldwide.
North America is Diageo’s largest market, but the company sees better growth opportunities in emerging markets like India and Africa, where incomes are rising and more than 750 million new consumers will reach drinking age during the next decade.
Diageo is doing some wheeling and dealing, too. The company paid $700 million last year to acquire George Clooney’s premium tequila brand Casamigos. This year, it has plans to sell parts of its U.S. spirits portfolio, which includes brands like Seagram’s VO whisky and Goldschlager schnapps; experts believe these U.S. brands may fetch as much as $1 billion.
Diageo has raised its dividend 8% annually for the past five years while maintaining a steady payout ratio of about 50%.
Courtesy Moríñigo via Wikimedia Commons
Market value: $6.7 billion
Spanish utility Enagas (ENGGY, $14.20) has raised its dividend 14 years in a row. The company is Spain’s principal natural gas carrier, delivering gas via its 10,000-kilometer pipeline network. Enagas also is TSO-certified by the European Union, which enables the company to operate in eight European countries. In addition to its pipeline, Enagas owns three underground storage facilities, four gas liquid plants and interests in natural gas assets in Mexico, Peru, Sweden and Chile.
An unusually cold European winter created unusually high demand for natural gas last year and helped Enagas grow earnings by 5%. The company is guiding for 3% annual growth this year and next.
Enagas is a major investor in the Trans Adriatic Pipeline (TAP), a new pipeline being constructed that will supply Europe with natural gas from the Caspian Sea. So far, the company has invested 439 million euros ($509.5 million) in this project, which is 65% completed and has a scheduled start date of 2020.
Enagas fattened its dividend by about 5.7% from 2013 to 2017, and the company is guiding for 5% annual dividend growth through 2020.
Courtesy Erkethan via Wikimedia Commons
Market value: $31.1 billion
Dividend yield: 1.3%
French Essilor International (ESLOY, $72.22) is the world leader in optical lenses for eyeglasses, deriving 46% of its sales from North America and another 28% from Europe. Its flagship brands include Varilux, Transitions and Foster Grant.
New products and improving results for its Sunglasses and Readers divisions enabled Essilor to generate 6.7% sales growth last year; the company is targeting 4% growth in 2018.
Essilor is merging with eyeglass frame maker Luxottica in a deal that creates an optical industry giant with more than 15 billion euros ($17.4 billion) in annual sales. Luxottica owns the familiar Ray-Ban and Oakley brands and also creates high fashion frames for Versace, Armani and Prada. The new company will be called EssilorLuxottica and will be the world leader in eyewear, selling through a network of nearly 3,900 LensCrafter and Sunglass Hut stores.
Essilor pays dividends once a year and has increased its payout for a quarter of a century. The company’s dividend growth rate for the past five years is 10.9%, and despite lower profits due to merger costs, Essilor juiced its payout by 35% last year.
Courtesy Nashville Area Chamber of Commerce via Flickr
Market value: $30.6 billion
Consecutive annual dividend increases: 21
Fresenius Medicare Care (FMS, $49.69) provides dialysis services through clinics in 150 countries. The company operates more than 3,500 clinics and treated over 300,000 patients last year. Much of Fresenius’ top-line growth has come from acquisitions that include Sparsh Nephrocare, XENiOS, Cura Group, and most recently, NxStage Medical (NXTM), a major competitor.
The company generates nearly 75% of its revenues from North America, which houses approximately 2,400 of its clinics. Demand for dialysis services is rising roughly 6% per year due to an aging U.S. population, the obesity epidemic and longer life expectancies. Fresenius also is building a presence in home dialysis treatment, which is forecast to represent 15% of its patients by 2020.
Fresenius grew its earnings per share by 12% in 2017 and expects to maintain high-single-digit EPS growth through 2020. The company’s dividend has grown at a less robust rate of about 6.3% annually.
Market value: $43.1 billion
Dividend yield: 0.8%
German Fresenius SE (FSNUY, $19.92) is a health-care giant operating across four divisions. The company owns a 31% stake in the aforementioned Fresenius Medical Care; the dialysis business contributes nearly 50% of group revenues. The other three businesses are Fresenius Helios (hospitals), Fresenius Kabi (prescription drugs) and Fresenius Vamed (health-care facility management).
Fresenius Helios operates more than 110 hospitals and is Germany’s largest hospital group. Two years ago, Helio acquired Spanish hospital group Grupo Hospitalario Quirónsalud and became the largest hospital chain in Europe.
The hospital acquisition helped Fresenius SE increase earnings 19% year-over-year in 2017. The company is guiding for 5%-8% revenue growth and 6%-9% earnings expansion in 2018. Longer-term, Fresenius SE is targeting EPS growth of 10.5% per year on average.
An investment in Fresenius five or even 10 years ago would have significantly outperformed both the S&P 500 and the DAX German index. The company has delivered five- and 10-year annual average shareholder returns of 19% and 15%, respectively.
Fresenius also has delivered dividend growth – payouts have widened for 25 years in a row, at a 16% annual rate.
Market value: $16.8 billion
Dividend yield: 3.3%
Consecutive annual dividend increases: 15
Belgium-based Groupe Bruxelles Lambert (GBLBF, $106.50) is a great choice for investors who want broad exposure to several European equities in one holding.
Groupe Bruxelles is Europe’s second largest investment firm. It was established more than 60 years ago and holds over than 19 billion euros ($22.2 billion) in assets.
This fund manager invests in European leaders in the consumer goods, business services, manufacturing and green energy sectors. Value is created by investing across broad themes (for example, demographic shifts) and actively managing the portfolio. Examples of the high-quality stocks in its portfolio include Burberry (BURBY), Pernod Ricard (PDRDY), Adidas (ADDYY) and Imerys.
With the goal of diversifying earnings, Groupe Bruxelles created its Sierra Capital subsidiary five years ago, which invests in different outside fund managers. So far, Sierra has returned more than 800 million euros ($940 million) of dividends to the parent company.
Groupe Bruxelles has performed well as an investment, with five-year annual returns averaging 12.6%. That’s significantly better than the Stoxx Europe 50 index, which only returned 8.3% annually over the same period.
The firm’s net asset value grew 11.2% last year, and Groupe Bruxelles raised its dividend 2.4% to 3 euros ($3.48). That was slightly below the 10-year average annual growth rate of 2.7%, but that still was good enough to mark 15 consecutive years of payout expansion.
Market value: $65.0 billion
Dividend yield: 0.6%
Consecutive annual dividend increases: 12
Hermes International (HESAY, $62.60) is a 180-year-old purveyor of high-fashion goods and among the most recognizable luxury brands in the world. In addition to its iconic scarves, Hermes sells leather goods, home accessories and other consumer items through a worldwide network of more than 300 stores.
This quintessentially French company derives the largest chunk of its sales (35%) from the Asia-Pacific region. Other major markets include Europe (33% of sales) and the Americas (18%). Hermes benefits from a booming U.S. economy creating demand for luxury goods in this country as well as rising consumer wealth in China.
Hermes has produced 13.1% annual sales growth and 15.5% annual EPS gains on average over the past decade. Sales improved 8.6% last year due to the introduction of several new fashion lines and fragrances, a new store in Brazil and re-launches of 20 existing stores. Hermes plans to renovate another 20 stores in 2018 and launch a new website in Europe and China.
Shares of Hermes and other luxury goods companies have improved sharply this year due to a ruling by the European Union Court of Justice that blocks e-commerce sites such as eBay (EBAY) or Amazon.com (AMZN) from selling European luxury products.
Hermes’ success has allowed it to grow dividends by a nice 12.5% annual rate over the past half-decade. And in addition to a 12% hike last year to 3.75 euros per share, the company also paid out a 5-euro special dividend. Thus, investors received about $10.20 in dividends in 2017.
Market value: $35.4 billion
Dividend yield: 6.2%
U.K.-based Imperial Brands (IMBBY, $37.84) is the world’s fifth largest tobacco company, and it operates through five businesses: 1) Imperial Tobacco, which produces cigarettes, cigars and smokeless tobacco; 2) Tabacalera, a premium cigar business; 3) ITG, America’s third largest tobacco company; 4) Fontem Ventures, which develops e-cigarette products; and 5) Logista, which provides distribution services in Europe.
Imperial is streamlining its brand portfolio and increasing its investments in growth brands (Gauloises, L&B, Winston and West) that command strong market shares and specialty brands (Gitanes, Kool and Drum) that address profitable niches.
The company is also building its Blu e-cigarette brand and plans to distribute the product in four new markets this year. Meanwhile, in China, Imperial has formed a joint venture with state-owned China National Tobacco and is expanding its foothold in the world’s largest cigarette market.
Many analysts and money managers consider Imperial a prime takeover target, meaning investors could potentially capture a buyout premium by owning shares.
Imperial has been paying dividends since 1997. The company has improved that payout by 10% for each of the past nine years, and Imperial is committing to at least 10% average annual growth going forward.
Market value: $12.4 billion
Dividend yield: 0.9%
U.K.-based Intertek Group (IKTSY, $76.00) provides quality assurance services to customers in the energy, chemical, agricultural, construction and health-care industries. The company operates more than 1,000 testing labs across 100 countries, and its services include systems certification and supply chain assessment, food, fuels and chemical testing, on-site inspection and product certification.
Intertek addresses a $250 billion worldwide market for QA services. At present, only $50 billion of these services are outsourced, leaving the company plenty of room to grow. Intertek is focused on building brand awareness, improving account penetration and cross-selling, prioritizing higher-growth segments and trimming costs to grow its business.
Intertek frequently uses acquisitions to supplement organic growth and has added more than £250 million ($328 million) to revenues since 2015 via M&A. Its most recent acquisition was Proasem, which expands Intertek’s fuel testing service offerings and presence in Latin America.
The company’s dividends actually have been expanding faster than earnings over the past 15 years, with payouts jumping by 19.1% annually versus 14% annual growth on the bottom line.
Market value: $9.3 billion
Dividend yield: 2.3%
Consecutive annual dividend increases: 31
Johnson Matthey (JMPLY, $95.89) might be two centuries old, but it’s still well entrenched in the future, manufacturing high-tech products from precious metals for customers in the automotive, natural resources and health-care industries. Among other things, this 200-year-old U.K. company is the global leader in automotive catalytic converters. It also produces specialty catalyst systems for chemical, oil and gas operations and active pharmaceutical ingredients for the pharmaceutical and biotech industries.
Johnson Matthey has a 65% share of the market for light-duty diesel vehicles in Europe and is expanding its presence in China. In the heavy-duty diesel truck market, the company is partnering with Cummins (CMI) to develop battery packs for electric trucks. In addition, Johnson Matthey is preparing for the automotive industry’s transition to battery-powered vehicles by building the first commercial battery plant in Europe, scheduled to commence production in 2020.
Sales are well-diversified geographically, spread across Europe (39% of sales), North America (33%) and China and Asia-Pacific (20%).
Johnson Matthey began paying a dividend in 1999, and it has been expanding both earnings per share and its dividend at a 7% annual rate over the past six years.
Courtesy Hajotthu via Wikimedia Commons
Market value: $19.4 billion
Dividend yield: 0.7%
Consecutive annual dividend increases: 32
Ireland-domiciled Kerry Group (KRYAY, $111.38) is a dominant player in packaged food markets across Ireland and the U.K. The company also is a world leader in specialty ingredients used to improve the flavor, appearance and health benefits of food.
Kerry’s recent growth is the result of rising worldwide demand for convenience and ready-to-go meals; increased emphasis on health, wellness and “clean” labeling; and an expanding middle class in developing countries that’s projected to increase 79% by 2030.
The company likely will need to rely on acquisitions to achieve its 10% annual EPS growth target over the next five years. According to Davy Research, Kerry Group may produce more than £800 million ($1.05 billion) of free cash flow, which will be used for M&A over the next two years.
Kerry made seven bolt-on acquisitions in 2017 and has a full pipeline of acquisition candidates, particularly in Asia, where the company may spend up to £1 billion ($1.3 billion) on M&A.
This European Dividend Aristocrat features one of the largest track records of dividend increases on this list, at 32 years of growth. The last hike was a 12% bump in 2017 to 0.63 euros (73 cents) per share.
Market value: $7.9 billion
Swiss chocolate-maker Lindt & Sprungli (LDSVF, $6,600.00) is a world leader in premium quality chocolates. The company manufactures chocolate from 12 sites across the U.S. and Europe, operates 410 retail stores and records sales in 120 countries. American consumers buy the company’s Lindt, Ghirardelli and Russell Stover brands and have made Lindt the No. 1 player in premium chocolates and No. 3 overall in the U.S. chocolate market.
Lindt generates 55% of sales in Europe and 40% in North America. The U.S. business posted lower results last year due to a decline in the number of department stores and independent drugstores, which are important distribution channels for chocolates. As a result, Lindt’s EPS growth was limited to less than 6%.
Demand for chocolates is growing at single-digit rates in developed countries and double-digit rates in emerging markets. So it should be no surprise that Lindt anticipates the majority of its future growth will come from emerging markets like China, South Africa, Brazil and Russia, where sales rose 12.4% last year. The company is guiding for 5% organic growth in 2018 and long-term growth averaging 6%-8% per year.
Lindt’s average dividend growth over the past five years has been a strong 10.9%, including a 10% hike last year.
Market value: $138.6 billion
Dividend yield: 1.4%
Consecutive annual dividend increases: 35
France’s L’Oreal (LRLCY, $49.11) is the world leader in cosmetics and skincare. The company holds a 19% share of the global cosmetics market and a 37% share of the skincare market.
L’Oreal operates under 34 different brands that are sold across roughly 150 countries. In addition to its iconic L’Oreal brand, the company owns Maybelline, Garnier, Urban Decay and Nyx cosmetics, and Lancôme, Yves St. Laurent, Giorgio Armani and Ralph Lauren fragrances.
The global market for cosmetics is growing 4%-5% a year as a result of advertising on social media, increasing urbanization and rising online beauty spending by an expanding middle class. L’Oréal’s online sales grew 24% last year, and the company already commands a 10% share of the e-commerce market for beauty products. L’Oreal also is well-positioned in China and Asia Pacific, which contribute 37% of annual sales.
L’Oreal went high-tech last year by acquiring Modiface, a creator of artificial intelligence and augmented reality tools for beauty brands. Modiface creates software that allows customers to upload a selfie to their smartphone and test various makeup looks, including lipstick, blush and eyeshadow, without physically applying the products.
L’Oreal’s earnings growth hasn’t been too impressive over the past half-decade, at just 3%. But the dividend has expanded more than twice as fast, at 7.6% annually on average. Last year not only saw a 7.9% improvement to the payout, but also a preferential dividend of 10% to investors who have owned shares for at least two years.
Courtesy Ben P L via Wikimedia
Market value: $7.2 billion
The 2017 acquisition of Hewlett-Packard Enterprise’s (HPE) software division made Micro Focus International (MFGP, $16.37) the seventh largest software company in the world. Micro Focus provides enterprise-scale software for large businesses in areas such as applications development, analytics, big data, and security and risk management.
Since completing its initial public offering in 2005, Micro Focus has delivered 25.7% annual growth in EPS and 27.7% yearly growth to its semi-annual dividend, which jumped by 32.1% last year to 88 cents.
Micro Focus had made numerous large acquisitions of software brands in the past, but HPE’s software unit was its largest deal by far, quadrupling the size of the business. The downside: The company has struggled to integrate the two entities. One issues has been the Autonomy subsidiary that also was acquired through the deal; HPE purchased Autonomy in 2011 already has been forced to take billions of dollars in write-downs on the business. Another issue has been problems for Micro Focus implementing new IT systems, which has sparked resignations among North American sales personnel.
The company lost approximately half of its market value in March when the company lowered its 2018 revenue forecast and its CEO stepped down after only a few months on the job. Revenues went from a projected 2%-4% decline to a 6%-8% decline.
In July, Micro Focus announced a pre-tax loss for the first half of 2018 and said it plans to sell its SUSE Open Source software business for $2.5 billion. Management plans to use the sale proceeds to pay down debt taken on for the $8.8 billion HPE acquisition.
Micro Focus International shares recently were trading at 21 times trailing earnings. One of the company’s largest investors thinks the business is undervalued and is urging Micro Focus to sell to a private-equity firm.
Market value: $242.8 billion
Dividend yield: 3.0%
Consecutive annual dividend increases: 23
Nestle (NSRGY, $79.91) is the world’s largest food and beverage company, boasting operations in 189 countries. Nestle churns out food products at 413 factories in 85 countries.
Nestle products that are top sellers in their category account for 88% of the company’s sales. Nestle owns brands like Gerber baby food, Nescafe instant coffee, Purina pet food, Stouffers frozen foods and Perrier and Poland Springs waters.
The company’s packaged-foods operations have been struggling, but Nestle plans to re-energize results by increasing investments in its faster-growing coffee, pet food and bottled water businesses. In the past three years, Nestle has sold $2.8 billion of money-losing brands and replaced these with $3 billion worth of new brands the company believes are capable of delivering double-digit annual growth.
Earlier this year, Nestle paid $7 billion to acquire Starbucks’ (SBUX) packaged-coffee business. The company presently is in discussions to acquire Champion Petfoods for $2 billion.
The company’s dividend is one of the oldest among these European Dividend Aristocrats, dating back to 1959.
Market value: $182.5 billion
Dividend yield: 3.8%
Novartis (NVS, $78.59) is a global health-care company that generates more than $49 billion in annual sales through the development and marketing of blockbuster drugs such as Costentyx (arthritis) and Entresto (heart failure). Under a new CEO, Novartis has begun replenishing its drug development pipeline through research-and-development investment and acquisitions.
Earlier this year, Novartis sold its stake in a consumer health-care joint venture to GlaxoSmithKline (GSK) for $13 billion. Novartis used the sale proceeds to purchase gene therapy company AveXis, which is developing gene replacement therapies for spinal muscular atrophy (SMA), an inherited neurodegenerative disease.
Last year, Novartis launched CAR-T – a first-in-kind cancer gene therapy that involves extracting blood cells from a patient, modifying these cells to attack cancer and reinfusing the altered cells back into the patient.
Novartis plans to spin off its Alcorn ophthalmology group, which will free up additional resources for its legacy drug business. More acquisitions and licensing deals are in the works, too, including a plan to acquire Adamis Pharmaceuticals (ADMP). Adamis is developing an injectable treatment for allergy reactions that will compete with Mylan’s (MYL) EpiPen.
Novartis also plans to launch Aimoveg, a new class of medicine for migraines, this year.
Novartis has raised its dividend 21 years in a row and improved the payout by 7.1% annually on average over the past decade.
Courtesy Johan Wessman via Flickr
Market value: $120.5 billion
Dividend yield: 2.6%
Consecutive annual dividend increases: 13
Danish firm Novo Nordisk (NVO, $49.52) is the world leader in medicines for diabetes and obesity-related disorders. The company has a 47% share of the insulin market and a 27% share of the total market for diabetes care (which includes insulin).
Demand for the company’s medicines is growing because of the global diabetes pandemic. The incidence of diabetes has doubled over the past 16 years, and scientists believe the disease could affect 11.7% of the global population (more than 736 million people) by 2045.
To meet this threat, Novo is developing new products such as Ozempic, its best-in-class blood sugar control medicine, and Tresiba, a longer-lasting insulin. Analysts think both new products may have blockbuster potential.
The company pays out a healthy 50% of EPS in dividends. While Novo/Nordisk has grown its dividend by 25.6% annually over the past five years, 2017’s payout was just 3.3% better than the year prior, mostly because of increased spending on share repurchases.
Market value: $15.1 billion
Novozymes (NVZMY, $52.09) is the world leader in industrial enzymes and commands nearly half of this $4 billion market. Enzymes facilitate chemical reactions and are added to cleaning products, food processing, biofuel production and pharmaceutical manufacturing.
This Danish company flourished following its 2000 spinoff from the aforementioned Novo Nordisk, but growth has slowed due to lower oil prices, which reduced demand for some enzymes used in detergents, animal feed and biofuels.
Novozymes recently reduced its guidance for annual growth through 2020 to 6%-7% from an earlier range of 8%-10%. The company also forecasts organic sales growth of 4%-6% this year.
New products for laundry cleaning, vegetable oil processing, grain milling, animal health and biomass conversion enabled four of the company’s five businesses to grow in 2017. Moreover, Novozymes is developing new enzymes for treating wastewater – a market projected to reach $675 billion by 2025.
Novozymes increased its dividend 14.3% in 2017 – just below its five-year average dividend growth rate of 16.3%. The company plans to increase its dividend 13% in 2018 and boost its payout ratio from 40% to 50%.
Market value: $9.1 billion
Ireland’s Patty Power Betfair (PDYPY, $56.31) is a leading sports-betting bookmaker in the U.K. and Australia. The company was formed in 2016 through the merger of two major U.K. bookmakers, Patty Power and Betfair. The company operates 623 betting shops across the U.K. and Ireland, runs Ireland’s largest telephone betting service and has numerous online sites for sports-betting, poker and casino-gaming.
Paddy Power’s operations in the U.S. are small but growing. The company is a partner in the Golden Nugget, America’s largest online casino site. Paddy Power also owns TVG, a horse racing TV network and online betting business, and Draft, a fantasy sports app that was acquired last year.
A decision by the U.S. Supreme Court to open legalized sports-betting across all 50 states create new growth opportunities in the U.S. Patty Power is expanding its U.S. foothold by acquiring FanDuel, America’s No. 2 daily-fantasy sports site.
Paddy Power plans to expand its U.K. business by targeting different sets of customers for its two distinct brands and investing in sport apps and customer loyalty programs.
The combination of Paddy Power and FanDuel creates a gaming franchise that dwarfs online gaming rivals DraftKings and TwinSpires. In addition, Paddy Powers existing operations in horse racing may give the company a leg up in winning state gaming business; states usually give horse tracks preferred treatment when new gambling businesses are introduced.
Paddy Powers has grown dividends 9.7% annually since 2013 while maintaining a payout ratio of between 40% and 50%.
Courtesy Andrew Smith via Wikimedia Commons
Market value: $59.2 billion
U.K.-based Prudential PLC (PUK, $45.83) is a world leader in insurance products, annuities and other financial services. The company serves more than 36 million customers worldwide and holds nearly £700 billion ($918 billion) of assets under management.
Prudential sells annuity products in the U.S. through its Jackson subsidiary and is not affiliated with U.S. insurance giant Prudential Financial (PRU). Jackson is the largest wholesale distributor of variable annuities in the U.S. It has sales agreements with 627 broker-dealers firms that cover 75% of American financial advisors.
Prudential also is a powerhouse in Asia, where its Prudential Asia group is a market leader in insurance and asset management. The Asian business employs 600,000 agents, operates in 77 cities across China and generates sales through more than 10,000 bank branches.
In March 2018, the company announced plans to spin off its U.K. and European operation, M&G Prudential. Post-split, Prudential PLC will be a purely international firm focused on high-growing emerging markets, while M&G will be 100% focused on retirement and savings products, becoming what one analyst has described as a “dividend machine.”
Prudential itself has delivered five-year average dividend growth of 10.5% annually.
Courtesy Zarateman via Wikimedia Commons
Market value: $11.4 billion
Dividend yield: 5.1%
Red Electricia (RDEIY, $10.61) operates Spain’s electric power grid along with a fiber optic network that accounts for 49% of that country’s fiber rentals. Red benefits from healthy power demand in Spain, whose GDP growth (3.1%) is much better than the overall eurozone. In addition, Red leads Europe in using renewable energy for electricity; its renewable capacity has increased 53% over the past decade and presently accounts for 46% of power generation.
Red invested 412 million euros ($481 million) last year in its transmission system across Spain and completed the consulting phase of a project that will link transmission grids in Spain and France. Red also has a growing presence in South America through a project in Chile to interconnect that country’s central and northern power systems, and a new contract to interconnect the power grids of Chile and Peru.
Annual dividend growth has averaged 7% for the past three years, including a 7% improvement in 2017.
Moody’s recently upgraded its ratings on Red’s debt from “stable” to “positive,” citing the company’s improved financial position and measured 2017-19 growth strategy.
Courtesy William Murphy via Flickr
Market value: $200.3 billion
Dividend yield: 3.5%
Consecutive annual dividend increases: 16
Switzerland’s Roche Holdings (RHHBY, $29.06) is one of the world’s largest biotech company and the world leader for in-vitro diagnostics and tissue-based cancer diagnostics. Roche became a leader these areas in 2009 when the company acquired Genentech, considered by many to be the founder of the biotech industry.
The company’s drug portfolio includes best-selling oncology medicines such as Herceptin, Avastin and Perjeta, and immunology drugs Rituxan and Actemra.
Roche estimates that 19 billion diagnostic tests have been performed worldwide with its products. Its medicines have treated more than 137 million patients. The company’s pipeline features 72 drugs spanning oncology, immunology, neuroscience and infectious disease; of these, 43 medicines are in late- stage development, and six have been submitted to the FDA for approval.
Roche began paying dividends in 2005. Dividend growth over the past decade has averaged 8.2% annually, but growth has slowed to 3.6% annually over the most recent five years. And last year, RHHBY’s dividend grew by just 1.2%.
Courtesy TubularWorld via Wikimedia Commons
Market value: $9.2 billion
Dividend yield: 1.9%
Sage Group (SGPYY, $33.26) is an enterprise software business headquartered in the U.K. The company provides specialized software with applications in accounting, financial management, enterprise planning, HR and payroll, and payment processing and banking to business customers worldwide.
Sage currently serves roughly 3 million customers across 23 countries. Nine countries together account for 95% of Sage’s revenues. Its top markets are Europe (54% of sales) and North America (31% of sales).
Sage defines its addressable market as 82 million businesses worldwide that use cloud-based software. The company claims to be the only vendor having a product line broad enough to take a client business from start-up through scale-up to enterprise-sized.
Software subscriptions represent 44% of company sales. These subscription products create a revenue stream that is 78% recurring. Sage expects much of its future growth to come from improved cross-selling to existing customers and thinks sales gains will be split 50/50 between new and existing customers.
The company’s share price fell more than 20% in April when Sage’s full-year guidance for sales growth was cut from 8% to 7%. Some analysts believe this price dip may present an attractive entry point for investors.
The company’s dividend, which has been growing every year since 1999, has averaged 10.3% in annual expansion over the past decade.
Market value: $103.7 billion
Dividend yield: 4.5%
Consecutive annual dividend increases: 24
French pharmaceutical powerhouse Sanofi (SNY, $41.75) is relying on acquisitions to help replace eroding sales on Lantus, a blockbuster diabetes drug whose patent recently expired.
The company spent $11.6 billion earlier this year to acquire Bioverativ, which specializes in drugs for hemophilia. The acquisition is highly complementary to Sanofi’s development-stage blood-clotting drug Fitusiran. In addition, Sanofi paid $4.8 billion to purchase Ablynx and its portfolio of medicines for rare blood disorders.
New drugs from Sanofi’s in-house development efforts include cemiplimab, a treatment for skin cancer and the company’s first new cancer drug in seven years. Sanofi partnered with Regeneron Pharmaceuticals (REGN) to develop this drug, which may launch later this year. There is also a new medicine for multiple myeloma (blood cancer) that Sanofi plans to submit for FDA approval either this year or in early 2019, and a new treatment for metastatic breast cancer.
Sanofi has delivered 24 consecutive years of dividend growth on its yearly payout, averaging 4.9% growth on the distribution over the past decade. But it did up the ante for this year, boosting its dividend 13%.
Market value: $11.1 billion
Dividend yield: 4.0%
Consecutive annual dividend increases: 11
France’s SES SA (SGBAF, $19.96) is currently a member of the European Dividend Aristocrats … but that won’t last for much longer.
SES is the world leader in satellite services. The company operates a network of 66 satellites that cover 99% of the planet and currently reach 351 million homes. These satellites provide video distribution and network connectivity services to businesses, homes and government agencies worldwide.
The company’s SES Video division (68% of revenues) distributes 3,200 TV channels and 120 video-on-demand platforms in developed and emerging markets, as well as premium HD channels to more than 2 million German households. SES controls 18% of the worldwide market for broadcast-via-satellite and 24% of the market for HD services.
There’s more: SES Networks division (32% of revenues) is the world leader in call-over-satellite services, providing communications services to more than 25 million end-users worldwide.
Going forward, SES plans to leverage its position in high-margin video distribution to accelerate the growth of the networks business, where demand for distributed data is explosive. Global IP traffic is projected to triple over the next five years. The Networks division, meanwhile, serves large telecommunications and cloud companies and many government agencies. But it’s not cheap to keep this up; SES has spent more than 3 billion euros ($3.5 billion) on building its network through capital investments and acquisitions.
While SES had been able to string together more than a decade’s worth of dividend increases, the company cut its dividend 40% in 2017 and reset the annual payment to 0.8 euros (94 cents) to free up more cash for debt reduction and capital investments. So SES eventually will be booted from this group.
Courtesy Sardaukar Blackfang via Wikimedia Commons
Market value: $52.5 billion
Irish pharmaceutical maker Shire (SHPG, $172.06) may soon be acquired by Japanese competitor Takeda Pharmaceutical (TKPYY), which has offered $62 billion for the business. Both companies are waiting for their shareholders to sign off on the deal. Takeda expects the transaction to close during the first half of 2019.
The merger would create the world’s eighth largest drug company with $30 billion in revenues and bolster Takeda’s presence in the U.S. and Europe. Assuming the deal closes, post-merger Takeda would generate approximately 50% of sales in the U.S., which offers much greater pricing flexibility than markets in Europe or Japan.
Shire is a leader in developing drugs for rare medical disorders. The company has 15 new drugs in late-stage clinical development, including Lanadelumab, which qualified for priority review by the FDA and EU medical regulators earlier this year. Lanadelumab is a treatment for hereditary angioedema – a rare genetic disorder that causes debilitating, painful and potentially life-threatening swelling in the body.
Analysts project peak sales for Lanadelumab could exceed $2 billion a year.
Shire’s dividend growth isn’t anything to sneeze at, averaging 18.4% annually over the past 10 years, and 23.9% over the past five.
Courtesy Thue via Wikimedia Commons
Market value: $22.0 billion
Dividend yield: 7.0%
Consecutive annual dividend increases: 10
Skandinaviska Enskilda Banken (SKVKY, $9.75), more commonly known as SEB, is a leading Nordic financial services group serving corporate customers in Sweden, Denmark, Finland, Norway, Germany and the United Kingdom. Founded in 1856, SEB serves approximately 3,000 large corporate customers, 400,000 small- to medium-sized businesses and 4.0 million private customers. The firm has assets under management totaling SEK 1,838 billion ($208.5 billion).
This year, SEB is divesting its pension business, which was the fourth largest Danish life insurance company, for $DKK 6.5 billion ($1 billion). SEB will use this windfall to grow other areas of the bank.
SEB’s business plan focuses on accelerating growth in Sweden, expanding its corporate and institutional customer base in the Nordic countries and Germany while targeting U.K. corporate customers, and creating more long-term savings products for corporate and private customers.
The company has set financial performance goals that include achieving return on equity of 15% and paying out 40% of earnings as dividends. In 2017, however, SEB came up short on ROE (11.5%) and paid out much more of earnings as dividends (77%).
SEB halted its dividend in 2008 thanks to the global financial crisis, but has put together a string of increases ever since – and has done so at a rapid 25.1% average annual rate over the past five years.
Courtesy Philafrenzy via Wikimedia Commons
Market value: $18.5 billion
Consecutive annual dividend increases: 26
U.K. utility SSE PLC (SSEZY, $18.35) is Britain’s sixth largest utility by number of customers. SSE plans to merge its energy supply business with that of German energy firm Npower to create a new utility larger than market leader British Gas in electricity supply and second to British Gas in household natural gas distribution.
SSE thinks the new business will be more focused and agile and have better economies of scale. In addition, the merger will enable SSE – which also operates power plants and energy grids – to reduce reliance on household energy markets ahead of a U.K. government crackdown on utility profits through new caps on energy tariffs.
The merger should close this year – if SSE can address regulator concerns that the deal could lead to higher energy prices for consumers. The U.K. Competition and Market Authority (CMA) plans to issue their final ruling on the proposed merger in October.
Like most dividend companies, SSE’s payout growth hasn’t been explosive, at about 4.8% annually over the past decade, and 2.4% annually over the past five years.
Market value: $66.2 billion
Dividend yield: 3.4%
Unilever NV (UL, $55.54) is a consumer products giant with more than 400 brands in its portfolio, including American-friendly names such as Lipton, Knorr, Dove, Axe, Hellmann’s, Suave and Breyer’s.
Every day, 2.5 billion people, or 7 of 10 households, use Unilever products.
Approximately 85% of Unilever’s sales come from products that are either No. 1 or 2 in their category. Since 2013, the company has grown sales 8% per year by penetrating new geographic markets, offering a selection of both global and local brands, and making bolt-on acquisitions, China is a key growth market for the company, where Unilever is expanding through strategic partnerships. Unilever expects sales in China to reach 1.0 billion euros ($1.2 billion) by 2020.
Unilever Group consists of both a Dutch subsidiary, Unilever NV (55% of group sales) and a U.K. subsidiary, Unilever PLC (45% of group sales). The company has begun consolidating its operations into the Dutch unit this year. According to management, this operational stream-lining will make the business more agile and flexible in re-balancing the brand portfolio and improve corporate governance.
Unilever pays quarterly dividends. At present, Unilever PLC and Unilever NV pay separate but equal dividends. Post-consolidation, Unilever NV will be the surviving entity and all dividend payments will be made in euros.
Courtesy A P Monblat via Wikimedia Commons
Market value: $9.8 billion
Dividend yield: 2.5%
Whitbread (WTBDY, $13.57) is the largest U.K. operator of hotels and coffee shops.
The company owns Premier Inn, which operates approximately 800 hotels across Britain, the Middle East and Germany. Whitbread’s hotel group is expanding in Germany; it has acquired 19 hotels in major German cities and plans to build another 13 new hotels in the country. Premier Inn will open hotels in Hamburg, Munich and Leipzig later this year.
Whitbread’s Costa coffee shop business is the second largest coffee shop chain in Europe. Costa operates approximately 2,400 coffee shops in the U.K., more than 1,400 stores in 31 international markets and over 8,000 Costa Express self-serve kiosks. The company employs a joint site development model, resulting in more than half of its Premier Inns located adjacent to a Costa shop.
Costa holds 23% of the U.K. coffee shop market and has been growing approximately 10% per year in Britain. The coffee shop business also is aggressively expanding in China where it recently bought out its JV partner, securing more control in that market. Costa plans to open 100 shops in China this year and aims to have 1,200 stores in that market by 2022.
Whitbread plans to split its operations into two separate companies over the next 24 months. According to management, “de-merging” will enable each business to focus more resources on international growth and produce £100 million ($130 million) in efficiency savings over the next two years.
Whitbread’s payout has grown by 12.8% annually for the past 10 years, and its payout ratio tends to hover around 40% of earnings.
Courtesy Wo st 01 via Wikimedia Commons
Market value: $17.4 billion
Consecutive annual dividend increases: 28
Wolters Kluwer (WTKWY, $59.80) is a global leader in professional information, software and related services for customers in the health care, tax & accounting, finance, risk & compliance, and legal sectors. Headquartered in the Netherlands, the company has offices in more than 40 countries, sells to customers in approximately 180 countries and generated sales exceeding 4.4 billion euros ($5.1 billion) last year.
North America is Wolters Kluwer’s largest market, accounting for 60% of revenues, and Europe contributes 31% of sales. Most of the company’s products and services are subscription-based; as a result, more than two-thirds of Wolters Kluwer’s revenues are recurring.
The company’s organic revenue growth has been modest, ranging between 1%-3% a year over the past seven years. However, sizable recurring revenues make the business highly profitable. Earnings climbed by 13% in 2017, and the company targets 10%-15% EPS growth this year, which will be achieved by developing new global and cloud-based products and using acquisitions to gain footholds in adjacent markets.
Wolters Kluwer’s five- and 10- year annual dividend growth rates have averaged 3.9% and 3.1%, respectively. The company pays dividends semi-annually and typically maintains payout in a 30%-40% range.
Courtesy IAB UK via Flickr
Market value: $19.8 billion
Dividend yield: 5.0%
WPP PLC (WPP, $80.69) is the largest of five advertising holding companies that control a sizable percentage of the world’s advertising, marketing and communications.
WPP provides services through approximately 400 subsidiary businesses that specialize in advertising, media buying, consumer branding, public relations, digital marketing or health-care communications. It owns many of the best-known advertising and public relations firms, including Grey, Ogilvy & Mathers, Mediacom, Y&R and Hill & Knowlton.
WPP counts industry giants such as Google, Dell, Procter & Gamble (PG) and Unilever among its advertising and PR clients. The company serves 354 of the Fortune 500 companies and 29 of the Dow Jones 30 members.
Much of WPP’s growth has come from acquisitions. The company recently merged two of its largest PR firms with five branding agencies, creating a new entity called SuperUnion. Agency services have been streamlined for larger clients. A third of WPP’s revenues last year came from 51 highly focused account teams that operate like mini-agencies and work exclusively for big clients such as Colgate-Palmolive (CL) or Ford (F).
WPP’s shares fell sharply in February of this year thanks to a weak outlook, and the company suffered more tumult in April when the company’s CEO of 15 years was forced to step down following allegations of personal misconduct.
At least WPP’s dividend has been impressive. The payout has grown 17.7% annually on average over the past 10 years, and 17.9% over the past five.
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