In this article, we will discuss the 5 best European dividend stocks to buy now. If you want to see more stocks, you can also take a look at the 10 Best European Dividend Stocks to Buy Now.
5. Koninklijke Philips N.V. (NYSE:PHG)
Forward Dividend Yield: 5.93%
Number of Hedge Fund Holders: 8
Koninklijke Philips N.V. (NYSE:PHG) is an Amsterdam, Netherlands-based diversified medical technology and homecare company.
In a research note issued on September 12, Delphine Le at Societe Generale upgraded Koninklijke Philips N.V. (NYSE:PHG) stock from a Hold to a Buy rating and gave the stock listed on the Amsterdam Stock Exchange (AMS) a target price of EUR 21. This translates into a target price of $20.62 for the shares listed on the NYSE. The analyst believes that the current stock price has factored in all the negative developments, and Koninklijke Philips N.V. (NYSE:PHG) stock is currently significantly undervalued. Le anticipates the challenges related to recall in the company’s Connected Care segment to ease in Q3 2022, allowing Koninklijke Philips N.V. (NYSE:PHG) to regain its strong position in the industry.
Koninklijke Philips N.V. (NYSE:PHG) has a forward EV to EBITDA multiple of 9.3x as of September 30. This is substantially lower than the industry average of 14.3x and the company’s five-year average of 11.5x.
Here’s what Fiduciary Management said about Koninklijke Philips N.V. (NYSE:PHG) in its Q4 2021 investor letter:
“Koninklijke Philips N.V. (PHIA NA) is a top-10 global MedTech company with a strong position in diagnostic imaging, patient monitoring, respiratory care, and personal health. In normal times, the business should be able to grow the top line in the mid-single-digits, with potential to drive several hundred basis points of margin improvement. However, a €500 million sleep device product recall (to be completed by Fall 2022) has weighed heavily on the stock. In limited circumstances, including when unapproved ozone cleaning is used, a sound abatement foam component may degrade. This foam is being extensively tested for potential harmful effects (including carcinogens). Relatedly, Philips Respironics’ facility in Pennsylvania has received a Form 483 letter from the FDA with several “observations” that need to be addressed. We believe the €13 billion hit (-30%+) to the market cap far exceeds virtually all worst-case fundamental scenarios. Sleep system hardware accounts for only ~7% of the company’s sales. Prior to the recall, the stock had been trading at a sizeable discount to MedTech peers, despite having a good chance of growing earnings faster than the sector. The gap has widened dramatically, creating an attractive setup for those who are willing to see through this bump in the road.”
4. Novartis AG (NYSE:NVS)
Forward Dividend Yield: 4.37%
Number of Hedge Fund Holders: 22
Novartis AG (NYSE:NVS) is a Basel, Switzerland-based diversified pharmaceutical company with a focus on cardiovascular, hematology, immunology, and solid tumor treatments.
The company is offloading its business divisions to become a pure-play in the biopharma business that is US-focused. CEO Vas Narasimhan has highlighted that Novartis AG (NYSE:NVS) can outperform the current expectations as it has some of the biggest pharmaceutical brands in its portfolio and a few strong candidates in the pipeline. Novartis AG (NYSE:NVS) anticipates sales to compound annually by 4% till 2027 and forecasts core operating income margin to hover around the 40% level.
Novartis AG (NYSE:NVS) also claims that it has the biggest growth potential in the $1 trillion innovative medicines market, with some of its in-market brandings holding power to achieve multi-billion yearly sales, making it one of the best European stocks. Furthermore, Novartis AG’s (NYSE:NVS) dividend yield of 4.37% is also significantly higher compared to the industry average of 2.28%. According to experts, the company is trading at much lower than its fair value of $136.
3. Rio Tinto Group (NYSE:RIO)
Forward Dividend Yield: 12.42%
Number of Hedge Fund Holders: 24
Rio Tinto Group (NYSE:RIO) is a London, UK-based diversified mining company that has the distinction of being the second biggest mining entity in the world. The global transition towards lower greenhouse gas emissions will provide the company with long-term secular trends.
Rio Tinto Group (NYSE:RIO) offers an attractive dividend yield of 12.42% as of October 6, translating into an annual payout of $6.84 per share. On September 1, Rio Tinto Group (NYSE:RIO) closed an agreement to acquire Turquoise Hill Resources Ltd. (NYSE:TRQ) for $3.3 billion. The acquisition will provide the company with complete ownership over the world’s biggest copper and gold deposits located in Mongolia. In the future, copper is set to gain more prominence as it is an integral component in electric vehicles (EVs) and their charging stations. Copper is also utilized widely in other renewable energy infrastructures as governments around the world are aggressively working on lowering greenhouse gas emissions.
For the first half of 2022, Rio Tinto Group (NYSE:RIO) reported a robust balance sheet with a net cash balance of $300 million. The company also posted an attractive return on capital employed of 34% with an EPS of $5.33. Since 2014, Rio Tinto Group (NYSE:RIO) has consistently outperformed its peers in terms of returns, making analysts consider the company one of the best European stocks.
As of Q2 2022, Rio Tinto Group (NYSE:RIO) was held by 24 hedge funds.
2. National Grid plc (NYSE:NGG)
Forward Dividend Yield: 6.31%
Number of Hedge Fund Holders: 10
National Grid plc (NYSE:NGG) is a London, UK-based electric and gas utility company with operations in the UK and the US. The company is one of the world’s biggest publicly listed utility companies.
Experts consider National Grid plc (NYSE:NGG) as one of the best European stocks because it is likely to act as an inflation hedge. The company is set to experience EPS growth in double digits in the coming years. National Grid plc (NYSE:NGG) is making a significant capital outlay in renewable energy that will transform its portfolio down the line. By 2026, National Grid plc (NYSE:NGG) intends to invest as much as $39 billion across its various business divisions to become a net-zero emission entity by 2050. National Grid plc (NYSE:NGG) company has been increasing its dividends for the last 11 consecutive years.
Here’s what ClearBridge Investments said about National Grid plc (NYSE:NGG) in its Q4 2021 investor letter:
“National Grid is one of the world’s largest publicly owned utilities, focused on transmission and distribution activities in electricity and gas. National Grid performed strongly during the quarter as the business continued to de-risk following prior regulatory decisions and significant M&A. The company also benefited from falling real rates, a solid set of half-year results and strong Investor Day presentations.”
1. GSK plc (NYSE:GSK)
Forward Dividend Yield: 7.57%
Number of Hedge Fund Holders: 34
GSK plc (NYSE:GSK) is a Brentford, UK-based diversified pharmaceutical company that has received major product approvals for COVID-19, endometrial cancer, and HIV. The company claims that two million vaccines are administered every day across the globe, and 40% of children worldwide have a GSK vaccine administered every year.
On September 29, Martial Descoutures at Oddo BHF upgraded GSK plc (NYSE:GSK) stock from a Neutral to an Outperform rating. The analyst assigned GSK plc (NYSE:GSK) a target price of 1,700 GBP, translating into a target price of $38.09 for the ADRs listed on the NYSE. Each ADR represents two ordinary shares listed on the LSE.
GSK plc (NYSE:GSK) is now focused on becoming a biotech giant as it spun off its consumer division Haleon earlier this year in July. The company is working on improving its pipeline and received approval for Benlysta from the FDA on July 24. The drug aims to treat lupus in children between the ages of five and seventeen. This was the first new drug approved to treat lupus in over five decades. Analysts think GSK plc (NYSE:GSK) is among the best European stocks to buy now as it offers decent upside potential. The stock has a twelve months trailing (TTM) PE ratio of 7.4x currently, significantly lower than the sector average of 17.9x.
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