European Dividend Aristocrats – major changes in July 2021

Key points:

• The Euro Dividend Aristocrats Index is created by S&P and is based on a managed dividends policy of increasing or stable dividends for at least 10 consecutive years.
• 40 European stocks are a member of this list.
• In Europe, it is not common to focus on paying a dividend in a row ( consecutive years) to the shareholders.
• End of June, S&P introduced some new rules, which resulted in several changes to the list.

S&P Index company applies the following criteria to construct the US Dividend Aristocrats list:

• must be members of the S&P 500
• must have increased dividends every year for at least 25 consecutive years
• Market Cap at least USD 3 billion
• Liquidity at least USD 5 million (average daily value traded)
• Diversification, at least 40 constituents and not sector allocation above 30%

The European Dividend Aristocrats are based (by S&P) on the 40 highest dividend-yielding Eurozone companies within the S&P Europe Broad Market Index (BMI) and a managed dividends policy of increasing or stable dividends for at least 10 consecutive years.

Next to the currencies (EUR vs USD), the two major differences are:

• Increasing or stable dividends for at least 10 consecutive years vs 25 consecutive years (US)
• 40 highest dividend-yielding (EU), in the US the height of the yield is not a selection factor.

The Dividend European Aristocrats Excel spreadsheet contains the following fundamental and stock price performance metric for each stock in the index.

Fundamental metrics:

• Dividend & earnings per share
• Dividend Yield
• Pay-out ratio

In June 2021, S&P has announced an update to the Monthly Dividend Review (“MDR”) for the UK and high-yield euro dividend aristocrats.

A relevant change is to focus more on the quality of dividend. The Constituent Selection Rule is now:

“Stocks must have increased or maintained stable dividends for at least 10 consecutive years. Stocks cannot have an indicated yield of more than 10% as of the index rebalancing reference date. In addition, new index constituents must have a maximum 100% dividend payout ratio, and existing index constituents must have a non-negative dividend payout ratio”

New Euro Dividend aristocrats added to the index in July are:

• Elisa Oyj
• Kone Oyj
• Fresenius Medical Care
• Fresenius SE
• Weinerberger AG
• CANCOM SE
• Elia Group

In 2021 the Euro Dividend Aristocrats index performance is at the moment of writing up 11.31% year-to-date and almost back to the levels of early 2020. The annualized total return over 10 years is 6.93%. The indicated dividend yield is around 3.2% and the average projected PE is 15.66 for the stocks in this index.