We recently compiled a list of the 10 Best European Dividend Stocks To Buy. In this article, we are going to take a look at where Unilever PLC (NYSE:UL) stands against the other European dividend stocks.
Dividend payouts for MSCI Europe companies hit a record €407 billion in 2023, and they are set to grow even more in 2024, with an expected increase to €433 billion, up about 6.5%. According to Allianz Global Investors, the total dividend payout is expected to reach €460 billion by 2025, marking a 13% rise from 2023. The dividend yield is also climbing. It stood at 3.47% at the end of 2023 and could go up to 3.67% in 2024. This is still well above the yield on long-term German government bonds, even after bond yields shot up in 2022. German companies in the MSCI index paid out a 3.3% dividend in 2023, with a projected rise to 3.53% in 2024. Meanwhile, companies from Norway, though still at the top, are expected to see a slight decline in their yield, from 7.2% in 2023 to 6.4% in 2024.
Dividends have had a huge impact on overall equity performance in Europe. Over the last 40 years, about 36% of MSCI Europe’s total return has come from dividends. From 2019 to 2023, dividends made up almost half of the overall return, and from 2014 to 2018, they were responsible for most of it. On top of that, dividend-paying companies tend to have less volatile stock prices compared to those that don’t pay dividends.
Also Read: 10 Dividend Stocks For Steady Income and 10 Best Bank Stocks With High Dividends.
Global dividends hit a record $1.66 trillion in 2023, and they’re expected to reach $1.72 trillion in 2024, according to Janus Henderson. Dividend growth in 2023 was up 5%, with a 7.2% rise in Q4 alone. Banks were a major driver of this growth, delivering record payouts and benefiting from higher interest rates that boosted their margins. Although miners slowed down the overall growth, other industries like vehicles, utilities, software, food, and engineering showed strong performance, highlighting the value of having a diversified portfolio. Twenty-two countries saw record dividend payouts, with Europe (excluding the UK) and Japan playing a key role. The UK saw a 5.4% rise in dividends, and France, Germany, and Italy also set new records.
S&P Global Market Intelligence forecasted that Europe’s dividend payouts would hit €474 billion in 2024, which is a slight dip of 0.8% compared to last year. However, excluding special payments, ordinary dividends should rise by 4%, reaching a new high of €463 billion. Banks are leading the charge, making up 15% of the total dividend payouts, followed by capital goods and energy, both at 9%. The materials sector is set to see a 16% decrease in dividends, but it will still contribute about 6%, the same as utilities and food, beverage, and tobacco. The banking, capital goods, and pharmaceutical sectors are likely to see double-digit increases in their dividends, with banking staying strong at the top. On the flip side, the transportation sector might experience a steep 49% drop. That said, factors like geopolitical tensions and stubborn inflation might pose some risks for dividends in 2025.
Our Methodology
For this article, we used the Finviz stock screener to filter out European dividend stocks. We focused on picking stocks with a consistent record of paying dividends, offering dividend growth, and being financially stable to steer clear of yield traps. The list below is ranked in the ascending order of dividend yield as of December 20. We have also mentioned the number of hedge fund holders in each firm, which was sourced from Insider Monkey’s Q3 2024 database.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
A supermarket shelf overflowing with a variety of fast-moving consumer goods.
Unilever PLC (NYSE:UL)
Dividend Yield as of December 20: 3.33%
Number of Hedge Fund Holders: 22
Unilever PLC (NYSE:UL) is a global consumer goods company with a broad portfolio across five key areas – Beauty & Wellbeing, Personal Care, Home Care, Nutrition, and Ice Cream. Its well-known brands include Dove, Hellmann’s, Ben & Jerry’s, and Knorr. Founded in 1860 and headquartered in London, Unilever serves markets worldwide, offering everything from skincare and hair care to ice cream and plant-based foods.
In Q3, Unilever PLC (NYSE:UL) saw a 4.5% increase in underlying sales and a 3.6% growth in volume. This marks the fourth quarter in a row of positive volume growth, with Beauty & Wellbeing and Ice Cream segments leading the charge. Ice Cream, in particular, is benefiting from ongoing operational improvements, although growth may not always be steady. The company’s Power Brands grew by 5.4%, driven by strategic investments under its Growth Action Plan (GAP), which has led to more consistent and stronger results across the business.
In Mar Vista Strategic Growth Strategy’s third-quarter 2024 investor letter, Unilever PLC (NYSE:UL) was highlighted as a key stock. The company saw a 25.49% increase in its stock price over the past 52 weeks, and as of December 2, 2024, its market capitalization stood at $148.31 billion. Here is what Mar Vista Investment Partners has to say about UL:
“We resumed our investment in Unilever PLC (NYSE:UL). We divested our Unilever position in 2022, following the company’s failed attempt to acquire GlaxoSmithKline’s (GSK) consumer health business. That proposed deal, characterized by its exorbitant price tag and a strategic shift from incremental to transformative acquisitions, eroded our confidence in Unilever’s capital allocation capabilities. The strategic misstep, coupled with a shareholder revolt and a negative stock price reaction, ultimately led management to abandon the acquisition.
Since our departure, Unilever has hired a new CEO and demonstrated a renewed commitment to enhancing shareholder value through a more disciplined approach to acquisitions and divestitures. Trian’s involvement in Unilever, including their investment and Nelson Peltz’s board position, has positively impacted the company’s capital allocation strategy…” (Click here to read the full text)
On October 28, Unilever announced a $0.4755 per share quarterly dividend. The dividend was distributed to shareholders on December 6. Unilever PLC (NYSE:UL) ranks 7th on our list of the best dividend stocks from the European market.
Famous Wall Street hedge funds including Fisher Asset Management, GQG Partners, and Arrowstreet Capital held significant stakes in Unilever PLC (NYSE:UL) as of September 2024. Overall, 22 hedge funds were bullish on the stock at the end of Q3.
Overall UL ranks 7th on our list of the best European dividend stocks to buy. While we acknowledge the potential of UL as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than UL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.