Dividend Gems Are Still To Be Found Among These 13 French Stocks Trading As ADRs
U.S. dividend investors should think outside the box in finding undervalued dividend stocks...Foreign stocks now provide higher dividend yields than their U.S. counterparts, especially in Europe. Although many of these ADRs (American Depository Receipts) have infrequent trading and also tax implications, it is well worth casting your net across the world to find dividend gems. This article identifies 13 French ADRs that pay a yield that is higher than 2.5 percent and has a market cap above 15 billion.
Written by TheDividendManager.com
Below is the chart of the CAC40 index versus the Dow Jones Industrial Average. As you can see, French stocks have underperformed by a sizable margin, especially since early last year.
In examining French stocks, I ran a screen of those companies that pay a yield that is higher than 2.5 percent and has a market cap above 15 billion;
Company | Market Cap | Yield |
TOTAL S.A. | 118.29B | 4.97 |
Sanofi (NYSE:SNY) | 107.24B | 3.74 |
BNP Paribas SA (PINK:BNPQY) | 72.67B | 4.45 |
AXA SA (PINK:AXAHY) | 56.25B | 5.01 |
Air Liquide SA | 41.55B | 2.51 |
VINCI SA | 40.86B | 2.69 |
Danone (PINK:DANOY) | 39.29B | 2.73 |
Schneider Electric S.E. | 37.95B | 3.11 |
Orange S.A. (NYSE:ORAN) | 37.63B | 4.45 |
Société Générale Group (PINK:SCGLY) | 34.784B | 4.32 |
Credit Agricole S.A. (PINK:CRARY) | 33.85B | 5.03 |
Renault SA | 22.86B | 3.19 |
Michelin | 20.17B | 2.65 |
Carrefour SA | 15.82B | 3.56 |
Owning these stocks through ADRs also enhances risk through currency movements. If the U.S. dollar goes up, the value of your foreign holding goes down. This has had an impact on many international funds for the last several years, as those that were unhedged against the dollar have substantially underperformed those funds that are hedged. Examine the chart of the WisdomTree International Hedged Quality Dividend Growth Fund versus the WisdomTree International High Dividend Fund. The hedged product has far outperformed its unhedged counterpart.
One item of note for the country and the European Union is French election risk. The specter of a Le Pen victory has haunted the European stock rally for 2017. While most polls have Le Pen losing in the May 7th runoff election, investors are worrying of a Trump like upset. This could lead to France’s exit from the single currency, and perhaps the European Union as a whole. Despite the short-term risks, however, most investment analysts expect Le Pen to lose and stock valuations to rise as Europe catches up with the U.S.
- In fact, nearly 70% of European fund managers in the Bank of America Merrill Lynch survey foresee positive economic momentum over the next twelve months in Europe.
The odds are high that foreign stocks will outperform the U.S. over the next several years as valuations in Europe are well below that of the home market.
- According to data from Bloomberg and Factset, firms in Europe’s Stoxx 600 benchmark trade at 14.4 times estimated earnings versus 17.4 for U.S. firms within the S&P 500 Stock Index.
- France is even cheaper. The average price/earnings ratio of stocks in the CAC40 stock index is 12.8.
Additionally, there is evidence that when U.S. interest rates rise, the dollar actually weakens. In fact, non-U.S. developed markets outperform 88% of the time when U.S. interest rates are being raised by our Federal Reserve...
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