Data Show Little Improvement in Dividend Cover.
Dividend yields across Europe have plunged since the beginning of 2009, according to data published today by S&P Indices. Between February 2009 and June 2010 the dividend yield on the S&P Europe 350 has fallen
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Standard & Poor’s Financial Services LLC
by 53%, while dividend cover, the measure of companies’ ability to pay dividends from current earnings, has increased by only 14.9% over the same period.
Within individual markets, Belgium saw the greatest fall in dividend yield, with a decrease of 81.6% and a massive increase in dividend cover from a lowly 0.62 to over 4 times. Closely behind was Ireland with a 79% fall in dividend yield, but with a 46% reduction in dividend cover.
In major markets, Italy saw the biggest fall in yield with a 70% reduction, closely followed by Germany with 57.5% and then by the UK, France and Switzerland with falls of 50.4%, 44.2% and 42.9%, respectively. Among these, Switzerland saw the biggest increase in dividend cover, from just 0.9 times to over two times, giving it the healthiest level of cover of any of the major European markets.
Austria, Ireland and Luxembourg stand out in Europe as those countries seeing significant fall in both yield and cover from February 2009 to June 2010.
S&P’s European Dividend Aristocrats Index, composed of blue chip companies within the S&P Europe 350 that have followed a policy of consistently increasing dividends every year for at least 10 consecutive years and includes such companies as Nestle, Tesco and Royal Dutch Shell, saw a fall in yield of just 26.25% over the period, with a reduction in dividend cover of just 7.2%.
Over the period, the S&P Europe 350, which tracks the performance of Europe’s largest companies by market capitalisation, has risen from 1113.62 to 1593.74, a rise of 43.1%.
Spokesman Alka Banerjee, Vice President, Global Equities at S&P Indices, commented: “The data published today show that the process of rebuilding cover for companies across Europe has been far from uniform. With all major European stockmarkets having cover of, at best, two times the annual dividend, there is still scope for dividend payments to come under pressure in the event of further economic difficulties in the region.”
Following is a summary of the data:
Country/Index | Dividend Cover (June 2010) | Dividend Yield (June 2010) | Change in Cover (Feb 09 to Jun 2010*) | Change in Yield (Feb 09 to Jun 2010*) |
Austria | 1.57 | 4.48 | -44.57% | -58.29% |
Belgium | 4.04 | 2.39 | 551.34% | -81.57% |
Denmark | 3.46 | 1.00 | 11.00% | -70.48% |
Finland | 0.93 | 5.34 | -10.67% | -51.89% |
France | 1.29 | 4.16 | -16.66% | -44.15% |
Germany | 1.95 | 3.44 | 25.51% | -57.54% |
Great Britain | 1.92 | 3.95 | 8.24% | -50.41% |
Greece | 2.71 | 3.52 | 21.53% | -69.16% |
Ireland | 1.65 | 2.69 | -46.06% | -79.24% |
Italy | 1.60 | 4.35 | 19.57% | -70.05% |
Luxembourg | 1.57 | 3.07 | -63.43% | -49.84% |
Netherlands | 1.62 | 2.88 | 64.23% | -70.75% |
Norway | 1.39 | 3.80 | 26.72% | -66.81% |
Portugal | 1.60 | 5.58 | 1.51% | -29.50% |
Spain | 1.44 | 7.51 | -20.08% | -15.96% |
Sweden | 1.67 | 2.88 | 65.66% | -74.70% |
Switzerland | 2.12 | 3.07 | 130.25% | -42.87% |
S&P Europe 350 | 1.75 | 3.88 | 14.92% | -53.07% |
S&P Europe Dividend Aristocrats | 1.68 | 4.90 | -7.19% | -26.25% |
S&P Europe Dividend Opportunities | 1.63 | 6.02 | 44.30% | -67.92% |
* Period commences at 27 February, 2009, the earliest dividend data available. All data denominated in US $
Source: ETFWorld – Standard & Poor’s Financial Services LLC
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