5 Dividend Stocks That Will Benefit From a Stable Eurozone

Last week, Europe took a huge step in the right direction. A group of private banks agreed to take a 50% writedown on Greek bonds in an effort to keep the country from insolvency. Without the move, many feared the country would soon default on its loans, potentially starting a cascade of events that could eventually lead to a second global meltdown.

Does this mean the crisis is over? Hardly. There's still a long way to go.

But the market clearly applauded the move, as the S&P 500 rose 3.4% last Thursday. If investors are right, and this signals the beginning of the end of the eurozone crisis, it could be great news for companies doing business in Europe.

I've highlighted five dividend-paying companies that stand to benefit from a recovery on the continent. By adding these companies to your watchlist, you'll be able to keep tabs on all the latest commentary; at the end of the article, I'll offer you access to 11 more dividend stocks our analysts truly believe in.

Aflac (NYSE: AFL  )
Most people don't appreciate what a truly global company Aflac is. Though its spokes-duck is hugely popular in the States, the company does most of its insurance business in Japan. So where does Europe fit in?

The European connection comes from what Aflac does with the premiums it gets from policyholders. Aflac invests that cash before claims are filed and money needs to be paid out, and at the end of the third quarter, Aflac had large sums of money tied up in banks and telecoms in the U.K., Austria, Italy, and elsewhere across the eurozone. Clearly, if banks and other businesses in these countries can move toward stability, Aflac's investments are far safer.

Pessimism still rules the day right now, as the company trades for less than 7 times next year's earnings estimates. The bright side for those who jump in now is that they'll get a solid 2.8% dividend yield from a company that uses only 30% of earnings to pay out dividends.

  • Add AFLAC to My Watchlist.

Philip Morris (NYSE: PM  )
Though you may think this is an American brand, Philip Morris was spun out of parent company Altria (NYSE: MO  ) years ago, with the former handling international cigarette sales, and the latter covering North America.

Investors in cigarette stocks love these companies because they provide a product that its customers need, day-in and day-out, regardless of the economic winds. That being said, I have many friends who had to cut down from a pack-a-day habit to half of that while they've been out of work. If working-age folks in Europe are anything like that, they'll clearly be buying more cigarettes when they have more disposable income.

By buying shares in the company today, you get a cool 4.5% dividend from a company that uses only 57% of its earnings to make its payouts -- in other words, this is a very safe dividend.

Banco Santander (NYSE: STD  )
You can't really fault investors for being wary of a bank located in Spain. The country normally has high rates of unemployment, but the current level is crazy-high: 21.5%. Obviously, improvements in the country's bleak employment picture would help banks.

But Santander is more versatile than a first glance would indicate, with operations in Brazil and other Latin American countries as well. The bank currently trades for just 7 times next year's earnings, has a trailing dividend yield of around 9%, and uses just 51% of earnings to pay out those dividends.

Telefonica (NYSE: TEF  )
Everyone needs phone service these days, right? Sure, but again, people -- and more importantly, businesses -- are far more likely to pinch pennies on their phone bills when times are tight. Though Telefonica, like Santander, also has exposure to more stable regions like Latin America, Europe (Spain, in particular) makes up a large base of its business.

A recovery in Europe would be likely to translate to more revenue for the company, which currently trades for just 9 times next year's estimated earnings. With a trailing dividend yield approaching 10%, this company is worth a look.

Arcelor Mittal (NYSE: MT  )
This steel company, headquartered in Luxembourg, operates in five segments -- two of them having direct exposure to Europe. Its Flat Carbon Europe segment accounted for about a third of the company's revenue over the past 12 months, so despite its geographical diversity -- Arcelor has exposure to Asia, Africa, and the Americas as well -- that has provided the company with a buffer from Europe, a pickup in building would help both the top and bottom lines.

The company currently trades for less than 7 times next year's earnings, throws off a dividend around 3%, and uses only 31% of earnings to pay those dividends.

11 more options to solidify your portfolio
All five of these companies are solid, but to truly start firing on all cylinders, they need the recovery in Europe to start soon. If you're looking for some dividend-paying stocks that aren't necessarily so reliant on having the continent get its act together, I suggest you check out our newest special free report: "Secure Your Future With 11 Rock-Solid Dividends." Inside the report, you'll get the names of stocks our analysts hand-picked for their dividend-paying fortitude. The report is yours today, absolutely free.

Fool contributor Brian Stoffel owns shares of Aflac. You can follow him on Twitter at @TMFStoffel. The Motley Fool owns shares of Philip Morris International, Telefonica, Altria Group, and AFLAC. Motley Fool newsletter services have recommended buying shares of Aflac and Philip Morris International. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On November 01, 2011, at 5:41 PM, xetn wrote:

    A week makes a big difference and now that whole "write-down" appears to be collapsing. The Greeks don't seem to want anything except complete forgiveness of their debt plus more loans to pay for all of their beloved benefits.

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