Why Dividend Investors Should Love These 5% Yielding European Stocks

May 26, 2015 11:42 PM ETGSK plc (GSK)BP, SHEL25 Comments
Bob Ciura profile picture
Bob Ciura


  • U.S. stocks are still rallying, which has pushed down dividend yields. However, European stocks offer much higher dividend yields, in many cases well above 5%.
  • GlaxoSmithKline, BP, and Royal Dutch Shell are each struggling right now for various reasons, which has kept their valuations low. But this has also kept their dividends very high.
  • And, each company generates enough profits to sustain their sky-high yields. For income investors frustrated with paltry yields on U.S. stocks, take a closer look at Glaxo, BP, and Shell.

The U.S. stock market averages recently touched a new all-time high. As stock prices are rising, dividend yields are falling, since price and yield are inversely related. This leaves income investors in a tough spot, which leads many, including myself, to believe that bargains are hard to find among domestic stocks.

However, this isn't necessarily the case when it comes to global stocks. European equities are far more attractive than U.S. stocks right now, because stocks there are far cheaper than their U.S. counterparts. Of course, there is a reason for this, which is that economic growth remains very weak throughout Europe, due to a number of factors including the financial crisis in Greece.

But there remain a number of highly profitable European companies that have a global reach, and as a result are still generating strong cash flows. Even better, they pay very high dividend yields, in many cases far higher than the yields available in the U.S.

Specifically, I believe income investors should love GlaxoSmithKline (NYSE:GSK), BP plc (BP), and Royal Dutch Shell (RDS.B).

1 in Big Pharma, 2 in Big Oil

As previously mentioned, while U.S. stocks are roaring higher, European equities have stood relatively still. The good news is that this has left plenty of bargains available for income investors who can't find many dividend opportunities here.

GlaxoSmithKline is a diversified health care giant with a dividend that yields well over 5%. This is very attractive in itself, since many in its peer group offer yields at about half that. For example, Bristol-Myers Squibb (BMY) yields just 2.2%.

Glaxo has had some fundamental challenges that have suppressed its valuation. First and foremost is the loss of exclusivity for one of its key drugs, Advair. Because of this, earnings per share fell 16% last quarter, year over year. But Glaxo has a balanced business

This article was written by

Bob Ciura profile picture
I've been an investment analyst and financial writer since 2012. I hold a Bachelor's degree in Finance from DePaul University, and an MBA in Finance from the University of Notre Dame. I am currently Senior Vice President of Sure Dividend.

Disclosure: The author is long BP, GSK. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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