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Sept. 14, 2019, 1:46 p.m. EDT

3 dividend stock picks with yields as high as 12% from a manager who doesn’t focus on dividends

Fabio Paolini of Pictet Asset Management says a stock’s dividend offers no indication of its value

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By Philip van Doorn, MarketWatch

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“The banking sector in Europe has been very depressed for a number of years,” Paolini said, but now that “the regulatory headwinds are behind us,” because the banks’ capital levels are so high, quality franchises can be scooped up at low valuations.

So even though these three banks are suffering from low demand for loans and low interest rates, and are paying out nearly all their earnings in dividends, Paolini believes “the franchises are good” and “the payouts are sustainable in the short term.”

Bank Ticker Dividend yield Total return - 2019 through Aug. 29
Nordea Bank Abp /zigman2/quotes/208737326/delayed SE:NDA.SE 12.22% -9.9%
Intesa Sanpaolo S.p.A. /zigman2/quotes/206161760/delayed IT:ISP 9.78% 14.1%
Banco Bilbao Vizcaya Argentaria S.A. /zigman2/quotes/209653399/delayed ES:BBVA 4.68% -4.5%
Source: FactSet

For U.S. investors, there are American depositary receipts (ADRs) for all three:

• Nordea Bank Abp  ADR /zigman2/quotes/204413260/delayed NRDBY +0.35%  

• Banco Bilbao Vizcaya Argentaria S.A. ADR /zigman2/quotes/204078760/lastsale BBVA -7.46%  

• Intesa Sanpaolo S.p.A. ADR /zigman2/quotes/203575023/delayed ISNPY -4.31%  

Saying the dividends are sustainable over the short term isn’t the highest vote of confidence. But all three of these banks are held by the AMG Managers Pictet International Fund now that Paolini and his colleagues have “put some money to work” in the space. He sees “good downside protection” for all three, adding: “should interest rates rise one day or the economy recover, we think the upside should be significant.”

He described Nordea Bank  of Helsinki as a “pure retail” Scandinavian institution with “significant fee income” and called Intesa Italy’s most profitable bank, with close to half its revenue coming from fees. Significant revenue from asset management and insurance makes Intesa “resilient,” he said.

Banco Bilbao Vizcaya Argentaria  derives about 40% of its revenue from Spain and has large operations in Mexico and other regions of Latin America. “It has weakened significantly on interest rates and fear of Argentine contagion,” Paolini said.

Fund holdings

The AMG Managers Pictet International Fund has $289 million in total assets, which is a tremendous decline from $2.1 billion when Paolini was interviewed along with his co-managers in February 2018. He said the decline took place because one very large institutional client decided to move from active strategies to passive strategies. “So all the money that came in from them, in roughly one year to 18 months, came out,” he said. He added that the remaining investors in the fund were “fairly diversified.” 

Here are the fund’s 10 largest holdings (out of 62) as of July 31:

Company Ticker Total return - 2019 through Aug. 29 % of fund Dividend yield
Nestlé S.A. /zigman2/quotes/208115528/delayed CH:NESN 41.8% 3.7% 2.22%
Asahi Group Holdings Ltd. /zigman2/quotes/206211507/delayed JP:2502 16.2% 3.2% 2.16%
Informa PLC /zigman2/quotes/207253704/delayed UK:INF 42.3% 3.1% 2.57%
Royal Dutch Shell PLC Class B /zigman2/quotes/204253697/delayed UK:RDSB 2.4% 3.0% 6.75%
Square Enix Holdings Co. Ltd. /zigman2/quotes/206245892/delayed JP:9684 42.3% 2.9% 1.02%
Safran S.A. 26.1% 2.7% 1.39%
JD.com Inc. ADR Class A /zigman2/quotes/205122565/lastsale JD 46.9% 2.4% 0.00%
Anheuser-Busch InBev SA/NV /zigman2/quotes/203831500/delayed BE:ABI 50.6% 2.4% 1.46%
ASML Holding NV /zigman2/quotes/206208657/delayed NL:ASML 47.0% 2.3% 1.05%
LivaNova PLC /zigman2/quotes/208121019/lastsale LIVN -15.9% 2.3% 0.00%
Source: FactSet

More about dividend stocks in a world of low interest rates:

• 25 dividend stocks selected for value by an outperforming money manager

• This dividend-stock strategy is for investors who want an attractive monthly income stream

• Seeking attractive dividend stocks? Here’s how to avoid dogs

• This ‘resilient’ dividend stock strategy can limit risks to your portfolio

• This low-volatility dividend-stock strategy can give you peace of mind

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/zigman2/quotes/208737326/delayed
SE : Sweden: Stockholm
kr 55.37
-1.37 -2.41%
Volume: 11.42M
March 27, 2020 5:29p
P/E Ratio
13.96
Dividend Yield
7.95%
Market Cap
kr229.07 billion
Rev. per Employee
kr4.28M
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/zigman2/quotes/206161760/delayed
IT : Italy: Milan
1.57
-0.06 -3.95%
Volume: 179.04M
March 27, 2020 5:35p
P/E Ratio
6.55
Dividend Yield
7.40%
Market Cap
€28.52 billion
Rev. per Employee
€400,827
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/zigman2/quotes/209653399/delayed
ES : Spain: Madrid
3.10
-0.18 -5.34%
Volume: 46.22M
March 27, 2020 5:38p
P/E Ratio
5.88
Dividend Yield
6.78%
Market Cap
€21.83 billion
Rev. per Employee
€180,879
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/zigman2/quotes/204413260/delayed
US : U.S.: OTC
$ 5.51
+0.02 +0.35%
Volume: 433,803
March 27, 2020 3:59p
P/E Ratio
13.09
Dividend Yield
6.41%
Market Cap
$23.00 billion
Rev. per Employee
$491,436
loading...
/zigman2/quotes/204078760/lastsale
US : U.S.: NYSE
$ 3.35
-0.27 -7.46%
Volume: 4.76M
March 27, 2020 6:30p
P/E Ratio
4.23
Dividend Yield
6.84%
Market Cap
$24.09 billion
Rev. per Employee
$213,392
loading...
/zigman2/quotes/203575023/delayed
US : U.S.: OTC
$ 10.21
-0.46 -4.31%
Volume: 244,364
March 27, 2020 4:00p
P/E Ratio
6.35
Dividend Yield
9.37%
Market Cap
$31.44 billion
Rev. per Employee
$476,554
loading...
/zigman2/quotes/208115528/delayed
CH : Switzerland: SWX
CHF 97.44
-1.26 -1.28%
Volume: 9.68M
March 27, 2020 5:30p
P/E Ratio
22.67
Dividend Yield
2.77%
Market Cap
CHF284.26 billion
Rev. per Employee
CHF296,880
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/zigman2/quotes/206211507/delayed
JP : Japan: Tokyo
¥ 3,529.00
+102.00 +2.98%
Volume: 3.12M
March 27, 2020 3:00p
P/E Ratio
11.37
Dividend Yield
3.00%
Market Cap
¥1569.83 billion
Rev. per Employee
¥68.70M
loading...
/zigman2/quotes/207253704/delayed
UK : U.K.: London
465.30 p
-15.20 -3.16%
Volume: 4.65M
March 27, 2020 4:35p
P/E Ratio
25.91
Dividend Yield
5.05%
Market Cap
£6.01 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/204253697/delayed
UK : U.K.: London
1,230.60 p
-143.40 -10.44%
Volume: 19.96M
March 27, 2020 4:35p
P/E Ratio
8.03
Dividend Yield
12.37%
Market Cap
£107.15 billion
Rev. per Employee
N/A
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/zigman2/quotes/206245892/delayed
JP : Japan: Tokyo
¥ 4,600.00
+30.00 +0.66%
Volume: 950,100
March 27, 2020 3:00p
P/E Ratio
19.11
Dividend Yield
0.93%
Market Cap
¥545.15 billion
Rev. per Employee
¥55.01M
loading...
/zigman2/quotes/205122565/lastsale
US : U.S.: Nasdaq
$ 40.15
-1.86 -4.43%
Volume: 12.30M
March 27, 2020 4:00p
P/E Ratio
33.42
Dividend Yield
N/A
Market Cap
$52.04 billion
Rev. per Employee
$442,391
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/zigman2/quotes/203831500/delayed
BE : Belgium: Euronext Brussels
38.74
-3.67 -8.64%
Volume: 3.29M
March 27, 2020 5:36p
P/E Ratio
9.61
Dividend Yield
N/A
Market Cap
€83.08 billion
Rev. per Employee
€268,229
loading...
/zigman2/quotes/206208657/delayed
NL : Netherlands: Euronext Amsterdam
229.50
-19.50 -7.83%
Volume: 1.98M
March 27, 2020 5:35p
P/E Ratio
37.32
Dividend Yield
1.05%
Market Cap
€104.53 billion
Rev. per Employee
€470,770
loading...
/zigman2/quotes/208121019/lastsale
US : U.S.: Nasdaq
$ 43.57
+0.94 +2.21%
Volume: 528,989
March 27, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.07 billion
Rev. per Employee
$276,740
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Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.

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