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 BP p.l.c. (NYSE:BP) 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 large turbine generating power from natural gas, smoke rising in the background.
BP p.l.c. (NYSE:BP)
Dividend Yield as of December 20: 6.71%
Number of Hedge Fund Holders: 36
BP p.l.c. (NYSE:BP), headquartered in London since 1908, delivers energy solutions across multiple sectors. The company produces and trades natural gas, manages onshore and offshore wind energy projects, and develops hydrogen and carbon capture facilities.
BP p.l.c. (NYSE:BP) has made significant progress on its six priorities outlined earlier this year, pausing or halting 24 projects to refine its portfolio and focusing on competitive assets. New resource opportunities in Iraq, Azerbaijan, and Abu Dhabi are being explored, and cost-saving measures aim to achieve over $2 billion by 2026. The company remains committed to balancing growth in cash flow, capital discipline, and transitioning to cleaner energy through initiatives like biofuels, biogas, and EV infrastructure.
BP p.l.c. (NYSE:BP) reported strong operations in the third quarter, with upstream production up 3% year-to-date, including a 5% rise in liquid production. Upstream plant reliability exceeded 95%, and refining availability was over 96%. The company achieved 80% year-on-year growth in EV charging, delivering 1 terawatt-hour of electricity globally this year. BP also brought 23 kbd of biogas supply online, with additional plants set to launch in Q4. These efforts contributed to an underlying profit of $2.3 billion for the quarter, accompanied by a $1.75 billion share buyback and a $0.08 dividend per share.
In divestments, BP p.l.c. (NYSE:BP) is on track to meet its $25 billion target by 2025, having already announced $20 billion worth of sales. Meanwhile, acquisitions in transition growth engines like Bunge and Lightsource bp are now being integrated to maximize synergies over the next 12-18 months. The company reconfirmed a total of $7 billion in share buybacks for 2024, supported by a strong balance sheet and A+ credit ratings from Fitch and Moody’s.
BP p.l.c. (NYSE:BP) and Iraq have agreed on technical terms to redevelop the Kirkuk oil and gas field, with a final contract expected by early 2025. BP, which helped discover Kirkuk in the 1920s, aims to revive the neglected field as part of its upstream strategy. This follows a memorandum signed in August for broader investment in the region.
BP p.l.c. (NYSE:BP) is also a favorite stock of Wall Street hedge funds. In Q3 2024, 36 funds were bullish on BP p.l.c. (NYSE:BP), compared to 38 funds in the last quarter.
Overall BP ranks 2nd on our list of the best European dividend stocks to buy. While we acknowledge the potential of BP 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 BP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
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