Plenty of U.S. banks became dividend offenders, cutting or suspending payouts, during the global financial crisis.
The European sovereign debt crisis prompted similar behavior from some banks across the Atlantic, but with European equities resurgent and the overall dividend outlook for the region improving, investors could be treated to higher payouts from some of the continent’s financial services firms.
Excluding special dividends, payouts from companies in the MSCI Europe ex-U.K. Index will rise 6.8% to $251.2 billion this fiscal year, reports Peter Nurse for the Wall Street Journal. Banks will pay the most, in absolute terms, the Journal reported, citing research firm Markit.
Bank dividend growth in Europe could be a boon for the iShares MSCI Europe Financials ETF (NasdaqGS: EUFN), which currently has a 30-day SEC yield of 2%. While the U.K. and Switzerland combine for almost 45% of EUFN’s weight, the ETF is not light on previously controversial Eurozone banks. For example, Spanish banking giant Banco Santander (NYSE: SAN) is EUFN’s second-largest holding. [ETFs for an Improving Europe]
Santander will be the largest dividend contributor in absolute terms (in the MSCI Europe ex-UK Index), the Journal reported, citing Markit. The research firm also sees substantial increases in dividends from French and Swiss banks. France, Switzerland and Spain and EUFN’s second- through fourth-largest country weights, combining for about 35% of the ETF’s weight. [Europe Bank ETFs: Contrarian Investments]
Markit sees big dividend hikes coming from UBS (NYSE: UBS) and Credit Suisse (NYSE: CS), which combine for 6% of EUFN’s weight.
Another ETF to consider for the European bank dividend growth theme is the unheralded SPDR S&P International Financial Sector ETF (NYSEArca: IPF).
IPF is not a pure Europe play as the fund offers significant exposure to Japan, Australia and Canada, among others. However, Switzerland, France, Germany and Spain combine for 22% of the ETF’s weight and IPF offers exposure to five other Eurozone nations.
Santander and French banking giant BNP Paribas are found among IPF’s top-10 holdings.
SPDR S&P International Financial Sector ETF