10 Undervalued European Stocks Set to Increase Dividends

Banks
feature
heavily,
with
four
stocks
in
the
list.
According
to
Morningstar
analyst
Johann
Scholtz,
“a combination
of
sound
capital
adequacy
levels
and
a
material
improvement
in
profitability
allows
European
banks
the
luxury
of
being
more
generous
with
dividends.”

“For
ABN
and
ING
the
impact
of
higher
rates
is
delayed
by
the
nature
of
their
lending
books
(predominately
fixed
rate)
so
they
should
see
more
resilient
net
interest
income.
BBVA
and
Santander
businesses
are
primarily
outside
of
the
Eurozone
so
less
impacted
by
ECB
rate
decisions” 

The
Full
List
of
Undervalued
Dividend
Growing
Stocks

Continental
AG
[CON]

Morningstar
Rating:
★★★★★

Last
FY
Dividend:
EUR1.50/Share

Next
FY
Dividend
Est:
EUR1.96/Share
(Factset
Consensus)

Forward
Dividend
Yield:
2.7%

Considering
industry
trends
in
connectivity,
electronics,
and
safety,
we
think
Continental’s
revenue
will
grow
by
roughly
2-4
percentage
points
more
than
our
estimated
1%-3%
long-term
average
annual
growth
in
global
vehicle
production.
Above-industry-average
research
and
development
spending
enables
consistent
product
and
process
innovation,
supporting
Continental’s
revenue
growth,
healthy
return
on
invested
capital,
and
a
narrow
economic
moat
rating.

Read
Morningstar
analyst
Richard
Hilgert’s

full
take
on
the
stock. 

Ageas
[AGS]

Morningstar
Star
Rating:★★★★★

Last
FY
Dividend:
EUR2.10/Share

Next
FY
Dividend
Est:
EUR3.21/Share (Factset
Consensus)

Forward
Dividend
Yield:
8.1%

Ageas
is
an
improving
business.
However,
it
would
do
well
to
take
a
leaf
out
of
other
mid-sized
European
multi-line
books
and
concentrate
on
core
markets.
Ageas
has
clear
strength
in
its
domestic
market
Belgium,
evolving
to
be
the
market
leader
and
is
a
dominant
force
in
long-term
savings.
Its
strategy
in
this
line
is
to
continue
with
the
ongoing
shift
to
unit-linked
products
that
are
capital-light
despite
lower
margins.
This
is
probably
one
of
the
reasons
behind
the
company’s
gradual
but
upward
improvement
in
ROEs.
Investments
have
played
a
decent
part
in
improving
customer
service
and
protection
offerings
that
can
be
sold
into
savings
products,
and
this
creates
a
sticker
set
of
products
and
customers.
These
investments
have
oriented
around
improving
standards
of
underwriting,
and
despite
raising
expenses
the
net
effect
in
nonlife
insurance
has
been
positive.
Ageas
has
a
leading
health
insurance
business
with
expenditure
on
health
in
Belgium
being
one
of
the
highest
in
Europe.
The
firm
targets
price
stability
and
ambulatory
care
services.

Read

Morningstar analyst
Henry
Heathfield’s

full
take
on
the
stock.

Proximus
[PROX]

Morningstar
Star
Rating:
★★★★

Last
FY
Dividend:
EUR0.84/Share

Next
FY
Dividend
Est:
EUR1.20/Share (Factset
Consensus)

Forward
Dividend
Yield:
13.3%

Proximus,
the
incumbent
telecom
operator
in
Belgium,
shares
broadband
leadership
with
cable
peer
Telenet,
with
around
45%
and
35%
market
share,
respectively.
We
believe
the
Belgian
broadband
market
to
be
a
rational
oligopoly
where
Telenet
dominates
in
the
north
of
the
country
(Flanders)
and
Proximus
in
the
south
(Wallonia),
with
the
capital
Brussels
being
a
more
competitive
area,
given
its
high
density.
Proximus
has
a
fixed
network
presence
across
the
entire
country,
while
Telenet
and
Voo
(another
cable
operator,
acquired
by
Orange
in
2022)
operate
only
in
Flanders
and
Wallonia,
respectively.

Read

Morningstar analyst
Javier
Correonero’s

full
take
on
the
stock.

Banco
Santander
[SAN]

Morningstar
Star
Rating★★★★

Last
FY
Dividend:
EUR0.10/Share

Next
FY
Dividend
Est:
EUR0.20/Share (Factset
Consensus)

Forward
Dividend
Yield:
5.5%

Santander
generates
around
45%
of
its
earnings
from
its
highly
profitable
Latin
American
operations.
The
subscale
returns
Santander
has
historically
recorded
in
Europe
and
the
U.S.
have
obscured
the
high-double-digit/early-20s
returns
on
equity
Santander
generates
from
its
Latin
American
operations.
Santander
is
confident
that
it
can
significantly
improve
the
profitability
of
its
European
and
U.S.
businesses,
supported
by
higher
interest
rates.
We
wonder
if
Santander
could
boost
its
profitability,
release
capital,
and
rerate
its
valuation
by
trimming
its
portfolio,
so
that
it
operates
only
in
areas
where
it
has
a
clear
competitive
advantage.

Read

Morningstar analyst
Johann
Scholtz’s

full
take
on
the
stock.

Unibail-Rodamco-Westfield
[URW]

Morningstar
Star
Rating:
★★★★

Last
FY
Dividend:
EUR0.00/Share

Next
FY
Dividend
Est:
EUR2.72/Share (Factset
Consensus)

Forward
Dividend
Yield:
4.0%

The
group’s
assets
remain
high
quality,
owning
centers
that
are
among
the
best
in
Europe
and
the
U.S.
Its
iconic
assets
include
the
Carrousel
du
Louvre
in
Paris,
Westfield
Mall
of
Scandinavia
in
Stockholm,
Westfield
centers
at
Stratford
and
Shepherd’s
Bush
in
London,
the
Westfield
World
Trade
Center
in
New
York,
and
Westfield
Valley
Fair
in
the
San
Francisco
region.
We
expect
URW’s
malls
to
perform
strongly
as
economic
conditions
normalize
and
as
rival
low-quality
malls
in
the
U.S.
close
their
doors.
However,
URW’s
large
debt
load
puts
the
balance
sheet
under
pressure.
URW
was
able
to
issue
debt
during
the
COVID-19
crisis
at
cheap
prices
(albeit
slightly
higher
than
2019
levels)
but
needs
to
reduce
debt.

Read

Morningstar analyst
Alexander
Prineas’s

full
take
on
the
stock.

ABN
AMRO
Bank
[ABN]

Morningstar
Star
Rating: ★★★★

Last
FY
Dividend:
EUR0.99/Share

Next
FY
Dividend
Est:
EUR1.40/Share (Factset
Consensus)

Forward
Dividend
Yield:
10.3%

After
emerging
from
outright
government
ownership,
ABN
Amro
is
one
of
the
simpler
banks
in
Europe.
It
is
essentially
a
retail
and
commercial
bank
with
limited
capital
markets
activities.
Its
strong
retail
deposit
base
supported
above-average
profitability
until
negative
interest
rates
started
to
bite.
Having
a
lending
book
dominated
by
fixed-rate
mortgages
does
not
help
either.
The
long-duration
lending
book
forces
ABN
Amro
to
use
more
expensive
long-term
funding
in
order
to
manage
liquidity
risk,
which
then
compounds
margin
pressure
in
a
declining
interest-rate
environment.

Read

Morningstar analyst
Johann
Scholtz’s

full
take
on
the
stock.

ING
Groep
[INGA]

Morningstar
Star
Rating: ★★★★

Last
FY
Dividend:
EUR0.56/Share

Next
FY
Dividend
Est:
EUR1.07/Share (Factset
Consensus)

Forward
Dividend
Yield:
4.0%

In
our
opinion
the
highly
concentrated
Dutch
banking
system
is
one
of
the
most
attractive
banking
jurisdictions
in
Europe.
The
top
three
Dutch
banks
hold
upward
of
90%
of
current
accounts
between
them.
This
level
of
concentration
is
in
sharp
contrast
to
the
fragmented
banking
systems
that
typify
much
of
the
eurozone.
ING
is
the
market
leader
in
Dutch
personal
current
accounts
with
a
40%
market
share.
ING’s
market
leadership
translated
into
a
return
on
equity,
or
ROE,
of
24%
for
ING’s
Dutch
banking
operations
in
fiscal
2019,
which
is
substantially
ahead
of
the
6%
return
on
equity
of
the
consolidated
eurozone
banking
system
as
calculated
by
the
European
Central
Bank.
ING’s
other
operations,
outside
of
its
German
business,
does
detract
from
overall
profitability,
but
ING
remains
one
of
the
more
profitable
eurozone
banks
that
we
cover.

Read

Morningstar analyst
Johann
Scholtz’s full
take
on
the
stock.

Morningstar
Star
Rating: ★★★★

Last
FY
Dividend:
EUR0.35/Share

Next
FY
Dividend
Est:
EUR0.62/Share (Factset
Consensus)

Forward
Dividend
Yield:
7.7%

The
undoubted
crown
jewel
in
BBVA’s
portfolio
is
its
highly
profitable
Mexican
operation.
BBVA
is
the
clear
market
leader
in
the
oligopolistic
Mexican
banking
sector,
with
40%
of
Mexicans
receiving
their
salary
in
a
BBVA
current
account.
This
enviable
position
has
supported
BBVA’s
ability
to
generate
ROEs
north
of
20%
in
Mexico
consistently.
Geopolitical
tension
is
leading
to
a
reorganisation
of
global
supply
chains,
with
U.S.
firms
looking
to
bring
some
outsourced
activities
closer
to
home.
This
trend
could
become
a
long-term
secular
growth
theme
for
the
Mexican
economy,
supporting
BBVA’s
revenue.

Read

Morningstar analyst
Johann
Scholtz’s full
take
on
the
stock.

Telefonica
[TEF]

Morningstar
Star
Rating: ★★★★

Last
FY
Dividend:
EUR0.24/Share

Next
FY
Dividend
Est:
EUR0.30/Share (Factset
Consensus)

Forward
Dividend
Yield:
7.9%

After
expanding
its
operations
to
many
European
and
Latin
American
countries
during
the
1990s
and
2000s,
Telefonica
has
turned
around
its
strategy
in
recent
years
to
focus
on
four
key
markets:
Spain,
the
United
Kingdom,
Germany,
and
Brazil.
Telefonica
is
divesting
or
restructuring
its
Latin
American
operations
(except
Brazil)
and
infrastructure
assets
such
as
towers
or
noncore
fiber
networks
and
intends
to
use
the
proceeds
to
reduce
debt,
a
strategy
we
look
favorably
upon.

Read

Morningstar analyst
Javier
Correonero’s

full
take
on
the
stock.

SCOR
[SCR]

Morningstar
Star
Rating: ★★★★

Last
FY
Dividend:
EUR1.40/Share

Next
FY
Dividend
Est:
EUR1.84/Share (Factset
Consensus)

Forward
Dividend
Yield:
6.6%

Scor
is
a
large
reinsurance
company
headquartered
in
Paris.
It
operates
in
over
100
countries,
serving
many
clients
from
offices
worldwide.
Scor
was
established
in
the
1970s
and
has
grown
by
acquisitions.
This
started
to
take
place
in
the
late
1990s
with
the
purchase
of
La
Vittoria
Riassicurazioni
in
Italy.
Shortly
after
this,
the
business
merged
with
Union
des
Assurances
de
Paris.
Broader
problems
for
the
business
began
with
the
mid-1990s
acquisition
of
the
reinsurance
business
of
Allstate.

This
purchase
doubled
Scor’s
share
in
the
United
States.
The
acquired
reinsurance
portfolio
was
one
of
the
largest
books
of
small
and
medium-size
business
reinsurance
and
led
to
some
reserve
summons.
We
believe
there
is
one
thing
that
this
corporate
activity
has
produced
in
Scor’s
favor,
and
that
is
market
dynamics.
Because
of
this
acquisitive
growth
for
Scor
and
within
the
industry,
the
U.S.
life
reinsurance
industry
went
through
a
period
of
consolidation.
Half
of
the
U.S.
life
reinsurance
industry
was
acquired
in
the
lead-up
to
2007.
By
2014,
the
five
largest
life
reinsurers
accounted
for
90%
of
U.S.
premiums
written.

Read

Morningstar analyst
Henry
Heathfield’s

full
take
on
the
stock. 

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