Philip van Doorn

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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 -1.75%  

• Banco Bilbao Vizcaya Argentaria S.A. ADR /zigman2/quotes/204078760/composite BBVA -3.70%  

• Intesa Sanpaolo S.p.A. ADR /zigman2/quotes/203575023/delayed ISNPY -0.77%  

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 /zigman2/quotes/208737326/delayed SE:NDA.SE -1.77%  of Helsinki as a “pure retail” Scandinavian institution with “significant fee income” and called Intesa /zigman2/quotes/206161760/delayed IT:ISP -1.30% 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 /zigman2/quotes/209653399/delayed ES:BBVA -3.22%  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. /zigman2/quotes/206963350/delayed FR:SAF 26.1% 2.7% 1.39%
JD.com Inc. ADR Class A /zigman2/quotes/205122565/composite 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/composite 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 71.64
-1.29 -1.77%
Volume: 6.40M
Nov. 13, 2019 4:21p
P/E Ratio
12.15
Dividend Yield
10.34%
Market Cap
kr292.92 billion
Rev. per Employee
kr4.28M
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/zigman2/quotes/206161760/delayed
IT : Italy: Milan
2.35
-0.03 -1.30%
Volume: 85.68M
Nov. 13, 2019 4:16p
P/E Ratio
9.92
Dividend Yield
8.39%
Market Cap
€41.23 billion
Rev. per Employee
€400,827
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/zigman2/quotes/209653399/delayed
ES : Spain: Madrid
4.76
-0.16 -3.22%
Volume: 16.00M
Nov. 13, 2019 4:20p
P/E Ratio
6.77
Dividend Yield
4.43%
Market Cap
€32.88 billion
Rev. per Employee
€180,879
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/zigman2/quotes/204413260/delayed
US : U.S.: OTC
$ 7.30
-0.13 -1.75%
Volume: 37,735
Nov. 13, 2019 10:17a
P/E Ratio
11.34
Dividend Yield
7.18%
Market Cap
$30.16 billion
Rev. per Employee
$491,436
loading...
/zigman2/quotes/204078760/composite
US : U.S.: NYSE
$ 5.21
-0.20 -3.70%
Volume: 724,728
Nov. 13, 2019 10:36a
P/E Ratio
6.61
Dividend Yield
4.49%
Market Cap
$36.39 billion
Rev. per Employee
$213,392
loading...
/zigman2/quotes/203575023/delayed
US : U.S.: OTC
$ 15.50
-0.12 -0.77%
Volume: 18,268
Nov. 13, 2019 10:17a
P/E Ratio
9.59
Dividend Yield
6.17%
Market Cap
$45.50 billion
Rev. per Employee
$476,554
loading...
/zigman2/quotes/208737326/delayed
SE : Sweden: Stockholm
kr 71.64
-1.29 -1.77%
Volume: 6.40M
Nov. 13, 2019 4:21p
P/E Ratio
12.15
Dividend Yield
10.34%
Market Cap
kr292.92 billion
Rev. per Employee
kr4.28M
loading...
/zigman2/quotes/206161760/delayed
IT : Italy: Milan
2.35
-0.03 -1.30%
Volume: 85.68M
Nov. 13, 2019 4:16p
P/E Ratio
9.92
Dividend Yield
8.39%
Market Cap
€41.23 billion
Rev. per Employee
€400,827
loading...
/zigman2/quotes/209653399/delayed
ES : Spain: Madrid
4.76
-0.16 -3.22%
Volume: 16.00M
Nov. 13, 2019 4:20p
P/E Ratio
6.77
Dividend Yield
4.43%
Market Cap
€32.88 billion
Rev. per Employee
€180,879
loading...
/zigman2/quotes/208115528/delayed
CH : Switzerland: SWX
CHF 104.68
+0.90 +0.87%
Volume: 3.46M
Nov. 13, 2019 4:21p
P/E Ratio
33.57
Dividend Yield
2.34%
Market Cap
CHF301.28 billion
Rev. per Employee
CHF296,880
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/zigman2/quotes/206211507/delayed
JP : Japan: Tokyo
¥ 5,218.00
-73.00 -1.38%
Volume: 1.14M
Nov. 13, 2019 3:00p
P/E Ratio
16.21
Dividend Yield
1.92%
Market Cap
¥2435.15 billion
Rev. per Employee
¥68.70M
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/zigman2/quotes/207253704/delayed
UK : U.K.: London
797.20 p
-9.60 -1.19%
Volume: 833,758
Nov. 13, 2019 3:21p
P/E Ratio
33.48
Dividend Yield
2.81%
Market Cap
£10.15 billion
Rev. per Employee
N/A
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/zigman2/quotes/204253697/delayed
UK : U.K.: London
2,332.00 p
+1.00 +0.04%
Volume: 1.38M
Nov. 13, 2019 3:21p
P/E Ratio
11.88
Dividend Yield
6.27%
Market Cap
£183.91 billion
Rev. per Employee
N/A
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/zigman2/quotes/206245892/delayed
JP : Japan: Tokyo
¥ 4,975.00
+105.00 +2.16%
Volume: 1.37M
Nov. 13, 2019 3:00p
P/E Ratio
28.56
Dividend Yield
0.86%
Market Cap
¥582.41 billion
Rev. per Employee
¥55.01M
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/zigman2/quotes/206963350/delayed
FR : France: Euronext Paris
148.70
0.00 0.00%
Volume: 190,627
Nov. 13, 2019 4:20p
P/E Ratio
29.78
Dividend Yield
1.22%
Market Cap
€59.21 billion
Rev. per Employee
€380,626
loading...
/zigman2/quotes/205122565/composite
US : U.S.: Nasdaq
$ 33.36
-0.21 -0.63%
Volume: 1.64M
Nov. 13, 2019 10:36a
P/E Ratio
55.08
Dividend Yield
N/A
Market Cap
$40.70 billion
Rev. per Employee
$442,391
loading...
/zigman2/quotes/203831500/delayed
BE : Belgium: Euronext Brussels
72.52
+0.63 +0.88%
Volume: 1.27M
Nov. 13, 2019 4:21p
P/E Ratio
22.13
Dividend Yield
N/A
Market Cap
€139.51 billion
Rev. per Employee
€268,229
loading...
/zigman2/quotes/206208657/delayed
NL : Netherlands: Euronext Amsterdam
243.60
0.00 0.00%
Volume: 375,765
Nov. 13, 2019 4:21p
P/E Ratio
45.83
Dividend Yield
0.00%
Market Cap
€101.60 billion
Rev. per Employee
€470,770
loading...
/zigman2/quotes/208121019/composite
US : U.S.: Nasdaq
$ 74.92
-1.24 -1.63%
Volume: 89,514
Nov. 13, 2019 10:36a
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$3.60 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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