Not too long ago I showed you the 5 highest yielding German dividend stocks. Today I would like to extend this thinking and share my thoughts with you about several high-yielding French dividend stocks.
Actually, it probably won’t stop there, because I’m considering to do this as a series of posts by covering most European Dividend Aristocrats from different European countries.
The reason for that is simple, because I enjoyed writing the post about those 5 German dividend stocks a lot!
The outcome of it showed us why some of those stocks could be attractive to dividend growth investors right now. On the other hand we learned that some of those dividend stocks should really be considered yield-traps.
So that’s what you can expect today in this article about French dividend stocks. I will share with you their 20-year dividend histories and I will use my typical unsalted opinion to share my thoughts about the stock.
It also doesn’t mean that these are buy recommendations or stocks that I would recommend in everyone’s portfolio. However, I firmly believe that it’s good for us as European dividend growth investors to keep an eye on what’s available in the market.
So let’s get started!
PS: The top 5 highest yielding French dividend stocks in this article are sorted from high-to-low.
French Dividend Withholding Tax
Dividend withholding tax in France is 12.8% for foreign investors. However, initial dividend withheld via most brokers is 30% which means that you will need to request the other 17.2% back yourself. Some brokers like ABN AMRO in the Netherlands have great customer service and they can do this automatically for you.
1. Orange SA
Orange SA (EPA:ORA | FR0000133308) is the 4th largest telecom provider in Europe after Vodafone, Deutsche Telecom and Telefonica. It has a very large history dating back all the way to the late 18th century, but the company became private 2 centuries later in 1988. This happened to satisfy a European directive to create competition for several public services. However, it wasn’t until 2001 that the company became public via a listing on the French stock exchange.
Since then Orange SA had a very bumpy road and I would argue that the European telecom market is a tough one. We all know that the market faces strong regulatory oversight and that competition is fierce. At the same time Orange is forced to make very large investments in future infrastructure and technology (i.e. 5G). These are risky investments, because it’s unsure whether those will ever make a good return on investment.
But attractive returns on investment are very much needed for a company like Orange to be able to grow its dividends. That’s probably why this company is not your desired dividend growth stock. Just have a look at the below dividend history.
It’s just horrible if you bought this stock for the dividend growth, because the payouts have been very unreliable. And this is the same going forward, because Orange announced to review their dividend policy during the midst of the pandemic.
As a result, the company intends to pay 0,70 Euro in dividends annually until 2023. This is different compared to the 90 cents currently (20 cents as a “bonus”). If you want to take something positive out of it, then you could argue that investors have some clarity going forward.
The result is that Orange SA pays a 7.10% forward dividend yield which is different than the 9.14% dividend yield you will see via providers like Yahoo or Google. This is another good reason to always check the latest earnings report, because you don’t need to dig deep to find this information.
Having said that, I’m personally avoiding this stock due to the lack of consistent dividend growth. However, if you are interested in a 7% dividend yield for the upcoming 2 years, then Orange could be a consideration for you. If history is a guidance into the future, then you could at least expect a 5% dividend yield as a minimum floor (0.50 cents in 2019).
Disclosure: I don’t own Orange and I don’t intend to buy it at this moment in time.
2. Credit Agricole SA
Credit Agricole SA (EPA:ACA | FR0000045072) is the 2nd largest bank in France after BNP Paribas. People familiar with the bank often associate it with its historical role in the agriculture economy, because it has been financing famers since the late 19th century.
Most people that follow me via the weekly Dividend Talk podcast know that I have a strong allergy for banks. The reason for that is simple and some of it is visible in Credit Agricole’s dividend history.
In my opinion banks have really screwed us up in the Great Financial crisis and there has been hardly any self-cleaning. The result of that is a very tight regulatory environment and especially in Europe. This also explains why you see a gap-year of dividend payments over 2019.
The ECB treats the big banks as systematically important and that’s why they prohibited them from paying out dividends during the depths of the economic crisis caused by the pandemic (no dividend for fiscal year 2019).
So it’s really nice that the company paid out 80 cents per share in dividends over 2020 (6.2% yield), but how reliable is this yield going forward?
Retirees who depend on passive income from dividends will not be able to count on European banks when shit hits the fan. That’s in the end the real main reason why I would never consider a bank in my portfolio.
Disclosure: I don’t own Credit Agricole and I don’t intend to buy it at this moment in time.
3. Total Energies SE
Total Energies SE (EPA:TTE | FR0000120271) is one of the big 5 Oil & Gas majors in the world. The company was founded in 1924 and is an honorably member of the European Dividend Aristocrat Noble 30 index.
I must say, I find TotalEnergies one of the best managed Oil majors in the world right now and I really like their boldness to transform into a green energy business. That’s also the main reason why they changed their name in May of this year from Total SA into TotalEnergies to illustrate their ambitions.
Time will tell us whether these green ambitions will be beneficial for dividend growth investors, but I’m giving the company the benefit of the doubt. It won’t be easy and they will probably need a lot of capital investments which might put pressure on their free cash flow. And as we know, cash is king, so eventually it might impact the dividend safety profile of TotalEnergies.
Having said that, the company has a dividend growth history of 38 consecutive years and it currently yields 6.11% (0.66 cents per quarter).
I honestly don’t expect a lot of dividend growth in the upcoming years, unless the oil price remains above the 70 USD per barrel. Such an oil price would allow the company to deleverage their balance sheet further and to buyback a nice amount of shares. Just the buybacks alone could result in renewed dividend growth going forward.
Personally I believe that TotalEnergies is trading around fair value right now. Not too long ago I did an analysis on all the 5 oil majors and I assessed the fair value of TotalEnergies to be 44,00 Euro (it trades at 43.86).
As announced earlier on social media, I aim to replace some of my ExxonMobil shares with TotalEnergies. Somehow I haven’t got to it yet, but I still intend to do it this year. I’m at a loss on ExxonMobil, so I could nicely use it for some tax harvesting to offset my gains in option trading.
Disclosure: I don’t own TotalEnergies, but I do intend to open an position before the end of this year.
4. Axa SA
Axa SA (EPA:CS | FR0000120628) is a well-known insurance business which also provides investment management and other financial services. The company’s roots have its foundation in 1816, but it experienced a lot of mergers and take-overs since that time.
Axa as we know it today is a conglomerate of multiple business units specialized in property & causality insurance and health insurance. It’s not a small business, because it earned nearly 100 billion in revenues in 2020. This is slightly trailing the insurance powerhouse Allianz SE which earned 116 billion in revenues last year.
Having said that, Axa currently yields 5.55% and that’s after their latest 1.43 Euro dividend payment in May of this year.
Unfortunately, Axa’s dividend has not been safe over the last 2 decades. The latest dividend cut was a year ago at the start of the pandemic. It just tends to reset their dividend during a financial crisis which means that we can’t really rely on it.
However, it does look like Axa’s management wants to gradually increase the dividend over time. I guess that last year’s pandemic wasn’t strong enough to impact their bottom-line sustainably, which is something good.
Having said that, I like this company quite a bit, but I’m going to give it a pass due to it’s unreliable dividend growth. It simply doesn’t pass the basic rules of my dividend stock screener.
Disclosure: I don’t own Axa and I don’t intend to buy it at this moment in time.
PS: Axa as the name of the company should not be mistaken with your AXA bike locks! Those are two different and unrelated businesses.
5. Vivendi SE
Vivendi SE (EPA:VIV | FR0000127771) is one of the largest media conglomerates in Europe, but I’ve noticed that most people don’t recognize them via their name. That’s not really a surprise, but just so you know, they are the company behind Canal+ (European version of HBO / ESPN).
Like 3 of the other 4 French dividend stocks, Vivendi also exists more than 100 years, because its roots date all the way back to 1853. The company as we know it today exists since 1997 after Compagnie Générale des Eaux (CGE) changed its name into Vivendi.
It later sold off its property and construction divisions in 1998 which became Vinci SA (EPA:DG), another CAC40 member. After that it sold of its water business in 2002 and established Veolia (EPA:VIE). Another company with their roots in CGE is the telecom giant Alcatel.
Some of these spin-offs were out of necessity, because the company almost filed for bankruptcy in 2002. The CEO from that time was found guilty in 2011 for embezzlement (isn’t that a fancy word for fraud?).
The company has a very interesting history and it sounds like we should consider this the French version of IG Farben. An old German company which forms the root of several DAX-member companies like Bayer, Basf and Sanofi.
Getting back to Vivendi as a dividend stock. The company currently yields 5.27% because of a 60 cents dividend per share.
The dividend history for Vivendi has been very volatile like most of the other stocks in this list. We should also ignore their 2015 dividends and reset them to 1 euro per share. The reason for that were 2 Euros in extraordinary dividends of which 1 euro was related to the sale of a stake in another company.
However, we should see 2016 as a year of a real dividend cut. Since then it has been climbing back, but I don’t have a lot of confidence in the dividend safety going forward.
It’s a pity, because this is the 4th stock on this list with an unreliable dividend history.
Disclosure: I don’t own Vivendi and I don’t intend to initiate a position anytime soon.
Bonus: Sanofi SA
I can’t let you go off the hook without any interesting yielding French dividend stock beyond TotalEnergies. Hence, let me present Sanofi SA to you.
Sanofi SA (EPA:SAN | FR0000120578) was officially established in 1973 as a subsidiary of Elf (the oil company). However, Sanofi as we know it today has really been created in 1994 when it was listed as an independent company on the stock exchange in Paris.
Fast forward to today and you will notice that Sanofi is the 7th largest Pharmaceutical company in the world by revenue (40.46 Bln). It is able to generate so much sales due a strong product portfolio in Specialty Care (immunology, rare diseases, rare blood disorders, neurology and oncology), Vaccines, and General Medicines (diabetes, cardiovascular, and established products).
It’s also a big R&D spender, because is has spent about 5.5 Billion in R&D in 2020. That’s a lot of money and equates to approximately 15% from their annual revenues. Their product pipeline looks strong from what I’ve seen.
I find Sanofi SA an interesting French dividend growth stock. The dividend yield is juicy enough at 3.6% and it has a dividend growth streak of 21 years (not even a single flat year!).
Though, the last decade saw limited dividend growth, because it only grew with an average of 2.49%. That is quite a bit below the current rate of inflation, so let’s hope it will grow a bit quicker going forward.
The good thing is that their balance sheet is strong and management is optimistic about their own growth forecasts of about 14% in “business” EPS for 2021.
Having said that, if you are just as optimistic as management (8% growth over the next few years), then I think that the stock is currently trading around fair value. If you are less optimistic (4% growth over the next few years), then the stock is overvalued according to my assessment.
The truth lies probably somewhere in between.
So in my opinion the stock is not trading at a discount. Though, I do find it an interesting price right now to consider as an entry position. This would allow me to start observing the stock, because maybe my forecast is too negative and therefore it is trading at an attractive valuation?
Nevertheless, I’m still not sure if I would like to have Sanofi in my portfolio at all. I already own quite some big Pharma in my portfolio with Johnson & Johnson, Novartis, AbbVie, Bayer and Bristol-Meyers.
Who knows, I’ll have another thought about it in the next few weeks and maybe I’ll just pull the trigger one time.
Final thoughts about these high-yield French dividend stocks
High-yielding French dividend stocks come with a lot of dividend safety risk. Unfortunately I have only confidence in TotalEnergies regarding their dividend growth prospects.
It therefore feels like high-yielding French dividend stocks require a lot of caution and attention for dividend growth investors. I would even argue that they are exemplary for the classical yield-traps.
At the same time it doesn’t mean that there are no interesting French dividend growth stocks. I find stocks like AirLiquide, L’Oreal, LVMH, Schneider Electric, Hermes International and Danone all interesting as long-term holdings. Most of these are just trading at very lofty valuations, which prevents me from entering positions right now.
But hey, that’s it from my side!
I’m curious to learn if you own any of these and what your thoughts are. I don’t mind to be challenged, because I’m probably more wrong than right in my assessments 🤗
Ah, and before I forget, feel free to let me know which country you would like to see evaluated next!
European Dividend Growth Investor