European equities were laggards when compared to US stocks in 2023 as economic activity in the Eurozone continues to contract. In December, the Eurozone saw its economic activity shrink for the seventh straight month. However, analysts at Citigroup believe 2024 will bring a positive change as they expect European stocks to hit record high in the year. Citigroup analyst Beata Manthey recently said that bad news is already priced in for European stocks. The analyst expects the regional benchmark Stoxx 600 Index to end 2024 at 510 points. As of December 18 the index was at 476 points. Citigroup’s analyst said the market has become too pessimistic when it comes to earnings growth expectations for European stocks. This development, she believes, has created a buffer zone to protect stocks from further declines should the European companies post disappointing earnings next year.
While we have analyzed US dividend stocks like Verizon Communications Inc. (NYSE:VZ), Altria Group, Inc. (NYSE:MO), and Pfizer Inc. (NYSE:PFE) consistently over the past few months, in this article we will be taking a look at some European dividend stocks hedge funds are piling into.
Methodology
For this article we first used a stock screener to identify companies headquartered in Europe with dividend yields of at least 2% as of December 15. From the resultant dataset we picked 11 companies with the highest number of hedge fund investors. Most of these companies are headquartered in Europe but have operations in the US and other parts of the world. The list is ranked in ascending order of the number of hedge fund investors. Hedge fund sentiment data was taken from Insider Monkey’s database of 910 hedge funds.
Photo by Viacheslav Bublyk on Unsplash
11. TE Connectivity Ltd (NYSE:TEL)
Number of Hedge Fund Investors: 46
Switzerland-based TE Connectivity Ltd (NYSE:TEL) make sensors and connectors for various industries. TE Connectivity Ltd (NYSE:TEL) has increased its dividend consistently since 2007. Earlier this month, TE Connectivity Ltd (NYSE:TEL) said its board approved an increase in its share repurchase program by an additional $1.5 billion. The company also approved a recommendation to increase its quarterly dividend from $0.59 to $0.65 per share for the four fiscal quarters starting in April 2024.
As of the end of the third quarter of 2023, 46 hedge funds had stakes in TE Connectivity Ltd (NYSE:TEL).
Carillon Eagle Mid Cap Growth Fund made the following comment about TE Connectivity Ltd. (NYSE:TEL) in its Q3 2023 investor letter:
“TE Connectivity Ltd. (NYSE:TEL) traded lower, along with other automotive suppliers, due to media speculation surrounding the United Auto Workers strike. Major U.S. original equipment manufacturers (OEMs) could temporarily shut down production if an agreement is not reached soon.”
10. Ferguson PLC (NYSE:FERG)
Number of Hedge Fund Investors: 46
Headquartered in the UK, plumbing and HVAC solutions company Ferguson PLC (NYSE:FERG) ranks 10th in our list of the best European dividend stocks to buy according to hedge funds. Earlier this month Ferguson PLC (NYSE:FERG) upped its quarterly dividend by 5.3%. Dividend yield came in at about 1.88%.
A total of 46 hedge funds tracked by Insider Monkey had stakes in Ferguson PLC (NYSE:FERG).
ClearBridge Mid Cap Growth Strategy made the following comment about Ferguson plc (NYSE:FERG) in its Q3 2023 investor letter:
“We initiated a new position in Ferguson plc (NYSE:FERG), in the industrials sector, a leading distributor of plumbing, pipes-values-fittings, appliances, janitorial supplies and other products to plumbing and mechanical contractors. The company is an established market leader, commanding nine percent of the market in a highly fragmented industry. Ferguson has the opportunity to grow faster than the industry average through scale and technology advantages as well as accretive acquisitions. With the company having divested its European operations to focus on the North American market, we believe it is poised for significant valuation improvement.”
9. CRH PLC (NYSE:CRH)
Number of Hedge Fund Investors: 48
With a dividend yield of over 6%, Ireland-based building materials company CRH PLC (NYSE:CRH) ranks 9th in our list of the best European dividend stocks to buy now.
As of the end of the third quarter of 2023, 48 hedge funds tracked by Insider Monkey had stakes in CRH PLC (NYSE:CRH).
CRH PLC’s (NYSE:CRH) management talked about dividends and other updates during Q3 earnings call:
We also continue to return significant amounts of cash to our shareholders through dividends and share buybacks. Our ongoing share buyback program is on track to return approximately $3 billion in 2023 and the current tranche of the program will be completed before the end of the year.
In advance of our intented transition to quarterly dividends in 2024 and consistent with our progressive dividend policy and strong financial position, this morning, we have announced an accelerated payment of our 2023 dividend, representing a 5% increase compared to the prior year. Looking ahead to the remainder of the year and based on current trading conditions at the momentum we see across our businesses, I’m pleased to report that we are raising our previous guidance and expect to deliver full year group EBITDA of approximately $6.3 billion well ahead of the prior year and representing another record year for CRH. Turning to Slide 2 and before taking you through the trading performance for each of our businesses, I’ll briefly outline our thoughts on the market backdrop and trading environment across our main markets of North America and Europe over the course of the year so far.
Despite the impact of higher interest rate environment, we continue to experience positive underlying demand across our key end use markets. In infrastructure, our largest …. [read the entire earnings call transcript]
Like CRH, Verizon Communications Inc. (NYSE:VZ), Altria Group, Inc. (NYSE:MO), and Pfizer Inc. (NYSE:PFE) are also popular stocks among smart money investors.
8. nVent Electric PLC (NYSE:NVT)
Number of Hedge Fund Investors: 48
UK-based electrical equipment company nVent Electric PLC (NYSE:NVT) earlier this month increased its dividend by 8.6%.
As of the end of the third quarter of 2023, 48 hedge funds tracked by Insider Monkey had stakes in nVent Electric PLC (NYSE:NVT). The most significant stakeholder of nVent Electric PLC (NYSE:NVT) was John W. Rogers’ Ariel Investments which owns an $113 million stake in nVent Electric PLC (NYSE:NVT).
During Q3 earnings call nVent Electric PLC’s (NYSE:NVT) management talked about dividends and guidance:
Year-to-date, we have returned $103 million to shareholders, including dividends and share repurchases. Moving to Slide 9, for our updated full-year outlook. We are updating our reported and organic sales forecast to reflect the mixed environment and expected channel inventory adjustment. Reported sales growth is now expected to be in the range of 12% to 13% versus our prior guidance of 13% to 15%. This reflects full-year organic growth of 3% to 4% versus our prior guidance of 4% to 6%.
We continue to expect acquisitions to contribute approximately 9 points to sales growth. We are raising our adjusted EPS guidance to a range of $3.01 to $3.03, up 25% to 26% versus our prior guidance of $2.85 to $2.91. This new guidance reflects our year-to-date performance, continued strong execution and better acquisition performance. We now expect acquisitions to contribute approximately $0.15 to adjusted EPS versus our previous expectation of $0.08 to $0.10. Looking at our fourth quarter outlook on Slide 10, we expect reported sales to grow 15% to 17% with acquisitions contributing approximately 13 points to sales. Organic sales are expected to be up 1% to 3%. We expect adjusted EPS to be between $0.73 and $0.75, which at the mid-point reflects 12% growth relative to last year.
Read the full earnings call transcript here.
Mairs & Power Growth Fund made the following comment about nVent Electric plc (NYSE:NVT) in its Q3 2023 investor letter:
“Stock selection remains a positive impact for the year and almost offset the performance headwind from sector allocation. Additionally, nVent Electric plc (NYSE:NVT), a Minnesota-based Industrials company, was a positive contributor and is connected to AI and technological advancements. nVent’s management team has done a remarkable job of reinvigorating the company’s organic growth. They also did a better job of navigating through the supply chain disruptions and input shortages than most. The company’s liquid cooling capabilities will likely be in high demand for the foreseeable future to prevent AI servers from overheating.”
7. Shell PLC (NYSE:SHEL)
Number of Hedge Fund Investors: 49
In June this year oil giant Shell upped its dividend by 15%. Shell PLC (NYSE:SHEL) said it would increase its shareholder distributions to 30% to 40% of cash flow from operations, up from 20% to 30% previously.
A total of 49 hedge funds in Insider Monkey’s database had stakes in Shell PLC (NYSE:SHEL) as of the end of September this year.
6. AstraZeneca plc (NASDAQ:AZN)
Number of Hedge Fund Investors: 49
UK-based AstraZeneca plc (NASDAQ:AZN) ranks 6th in our list of the best European dividend stocks to buy according to hedge funds. The stock is making moves after AstraZeneca plc (NASDAQ: AZN) said it would buy U.S. vaccine developer Icosavax (NASDAQ:ICVX) in a deal valued at up to $1.1 billion. The deal comes as AstraZeneca plc (NASDAQ: AZN) plans to strengthen its respiratory syncytial virus (RSV) vaccine portfolio.
Out of the 910 hedge funds in Insider Monkey’s proprietary database, 49 hedge funds had stakes in AstraZeneca plc (NASDAQ:AZN). The most significant stakeholder of AstraZeneca plc (NASDAQ:AZN) was Rajiv Jain’s GQG Partners which owns a $951 million stake in AstraZeneca plc (NASDAQ:AZN).
In addition to Verizon Communications Inc. (NYSE:VZ), Altria Group, Inc. (NYSE:MO), and Pfizer Inc. (NYSE:PFE), hedge funds also love AZN.
5. Novo Nordisk A/S (NYSE:NVO)
Number of Hedge Fund Investors: 51
Novo Nordisk A/S (NYSE:NVO) kept making headlines this year thanks to its weight loss drug Ozempic. The Denmark-based company Novo Nordisk A/S (NYSE:NVO) was given the title of company of the year by Yahoo Finance. The stock has gained about 41% year to date through December 16.
J.P. Morgan strategists recently said Novo Nordisk A/S (NYSE:NVO) could experience an EPS growth of about 22% in 2024.
Polen Focus Growth Strategy made the following comment about Novo Nordisk A/S (NYSE:NVO) in its Q3 2023 investor letter:
“We added new positions in Eli Lilly and Novo Nordisk A/S (NYSE:NVO) in the third quarter. We have been monitoring Lilly and Novo Nordisk for some time, and new clinical results from a recent drug trial give us confidence in the large upside potential for GLP-1s. These results from a Novo Nordisk study showed impressive cardiovascular outcomes for its GLP-1, Wegovy. This study of over 17,000 overweight or obese people with established cardiovascular disease (but without diabetes) showed that Wegovy reduced the likelihood of major adverse cardiovascular events (heart attack, stroke, sudden cardiac death) by over 20% for up to five years. This large and well-controlled trial helps to demonstrate that the weight loss benefits of GLP-1s (likely similar for Mounjaro and Wegovy) lead to better health outcomes for patients and likely save the healthcare system significant amounts of money over the long term. In our view, this makes it very unlikely that payors and governments will deny patient access and reimbursement for these drugs for the long haul (hence the positive stock price moves for Lilly and Novo when the data was released mid-quarter).
We have started with a small 1% position in Lilly, but when paired with our new holding in Novo Nordisk at 2% (NVO is slightly larger as its valuation is lower), it represents a 3% combined position in the two companies we expect to maintain a duopoly in this large drug class over the next several years.
Novo Nordisk has a long history as the leader in diabetes pharmaceuticals. It is much more narrowly focused on diabetes than Lilly with its GLP-1 drugs, Ozempic and Wegovy (Wegovy is the same drug as Ozempic but uses a different name for obesity), driving most of the company’s revenue and earnings growth. The cardiovascular outcomes trial mentioned above is a big positive for Novo. It establishes the duopoly with Lilly in insulin management for Type 2 diabetics and weight loss for the huge number of overweight and obese people across the globe.
Novo has more legacy diabetes products that its newer drugs will cannibalize, but our research indicates that we can expect high-teens earnings per share growth from Novo over the next five years. In addition, both Novo and Lilly have next-generation diabetes and weight loss drugs in development that appear even more effective than the current offerings while also offering new treatment modalities, such as oral drugs versus today’s auto injectables.”
4. GSK Plc (NYSE:GSK)
Number of Hedge Fund Investors: 52
UK-based pharma giant GSK Plc (NYSE:GSK) has a dividend yield of about 3.8% as of December 16.
A total of 52 hedge funds tracked by Insider Monkey had stakes in GSK Plc (NYSE:GSK) as of the end of September.
Ariel Global Fund made the following comment about GSK plc (NYSE:GSK) in its Q3 2023 investor letter:
“Global pharmaceutical and healthcare company, GSK plc (NYSE:GSK), also advanced in the period following a top- and bottom-line earnings beat and subsequent raise in full-year guidance. Shares were also aided by a successful U.S. and European launch of Arexvy, a respiratory syncytial virus (RSV) vaccine for older adults. Although risks around the Zantac litigation remain a concern, we believe GSK should generate sustainable growth and margin expansion as the company transitions its Pharma pipeline towards specialty medicines and vaccines. Furthermore, the company’s robust balance sheet provides the scope for bolt-ons, which has the potential to drive additional growth.”
3. Accenture Plc (NYSE:ACN)
Number of Hedge Fund Investors: 55
Tech services company Accenture Plc (NYSE:ACN) in September increased its dividend by 15.2%.
A total of 55 hedge funds tracked by Insider Monkey had stakes in Accenture Plc (NYSE:ACN).
ClearBridge Multi Cap Growth Strategy made the following comment about Accenture plc (NYSE:ACN) in its Q2 2023 investor letter:
“While the ClearBridge Multi Cap Growth Strategy has limited mega cap exposure, which has been a recent headwind to relative performance, we own several companies that stand to benefit from the explosive growth in generative AI. These holdings play key roles in building out the necessary infrastructure and helping customers leverage capabilities enabled by this emerging technology
Accenture plc (NYSE:ACN), a business and IT services consultant, will be instrumental in helping enterprises reinvent and modernize their IT architecture for AI. The company recently announced a $3 billion investment, which includes doubling their data and AI workforce to 80,000 to address this growing opportunity.”
2. Eaton Corporation PLC (NYSE:ETN)
Number of Hedge Fund Investors: 55
Ireland-based power management company Eaton Corporation PLC (NYSE:ETN) ranks 2nd in our list of the best European dividend stocks to buy according to hedge funds.
In October Eaton Corporation PLC (NYSE:ETN) posted Q3 results. Adjusted EPS in the period came in at $2.47, beating estimates by $0.13. Revenue jumped about 11.3% year over year to $5.95 billion, beating estimates by $10 million.
Carillon Eagle Mid Cap Growth Fund made the following comment about Eaton Corporation plc (NYSE:ETN) in its Q3 2023 investor letter:
“Eaton Corporation plc (NYSE:ETN) share prices jumped to all-time highs after the company boosted its earnings guidance for the year. Management noted that demand remains strong, which propelled the company’s sales backlog to a record level. Eaton remains well-positioned to capitalize on re-industrialization in North America and Europe.”
1. Linde PLC (NASDAQ:LIN)
Number of Hedge Fund Investors: 71
Chemical company Linde PLC (NASDAQ:LIN) shares were spotted in 71 hedge fund portfolios as of the end of the third quarter of 2023. Linde PLC (NASDAQ:LIN) during its Q3 earnings call said while it’s committed to dividends its main focus is investing in business:
“While our mandate is to maintain an A credit rating and grow the dividend, the priority for our capital is to invest into the business. This follows our time-tested investment criteria, which has enabled Linde to consistently achieve industry-leading ROC year-after-year. After investing into the business, surplus cash is used for share repurchases. Having a strong balance sheet, stable cash generation and an active stock repurchase program enables value-creating opportunities during turbulent markets.
In fact, our best stock repurchases happen when equity markets overreact. This is why we recently announced a new $15 billion stock repurchase program, allowing us to optimize our excess free cash flow and robust balance sheet.”
Read the entire earnings call transcript here.
Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also look at the 11 Best European Stocks To Buy Now and the 10 Best European Bank Stocks To Invest In.
Suggested Articles:
- 11 Best European Stocks To Buy Now
- 10 Best European Bank Stocks To Invest In
- 12 Undervalued European Stocks to Buy
Disclosure. None. 11 Best European Dividend Stocks to Buy was initially published on Insider Monkey.
