Finding a Dividend stock that consistently grows its dividends while maintaining a solid financial footing is no easy feat. But it’s certainly rewarding for passive income seekers.
While high dividend yields may come with caution flags. There are companies out there that strike the perfect balance of dependable dividends, stable business models, and growth potential.
In this post, we’ll look at three standout dividend stocks from Europe that can help you build reliable passive income over the long term.
Dividend Stock #1: ASR Netherlands (ASRNL.AS)
ASR Netherlands (ASRNL) is one of the major insurance players in the Dutch market. It offers a full suite of life, non-life, and health insurance services. ASR distinguishes itself through its strong focus on sustainability and socially responsible investments. These have been key to building its solid reputation over time.
For income-focused investors, ASRNL is an attractive option due to its consistent history of dividend growth. Solid financials support the dividend growth. With a dividend payout ratio of around 50%, it currently offers a starting yield of about 6.75%. Moreover, ASR’s valuation remains compelling, with the stock trading at a price-to-earnings (P/E) ratio under 10. This P/E ratio is well below many of its peers. The company’s reliable cash flow generation puts it in a good position to sustain or even increase its dividend in the coming years.
Projections suggest that ASR could earn over €3.00 per share next year, with steady annual earnings growth of around 3%. Assuming a modest P/E ratio expansion, investors could see ASR’s stock price climb to around €60 over the next five years. When you factor in those generous dividend payments, ASRNL has a strong potential for solid, long-term returns.
Dividend Stock #2: Spirax-Sarco Engineering plc (SPX.L)
Spirax-Sarco Group is a global leader in engineering, specialising in thermal energy management and industrial process solutions through its three core divisions. Steam Specialties, Electric Thermal Solutions (ETS), and Watson-Marlow. With direct sales in 67 countries and 11 manufacturing facilities worldwide, Spirax serves over 110,000 customers globally, offering localised, customer-centric solutions through its 1,300 sales engineers who provide on-site technical expertise. This global footprint, hands-on approach, and focus on operational efficiency have solidified Spirax-Sarco’s competitive edge, generating 85% of its revenue from OPEX budgets and ensuring ongoing client reliance.
For income-focused investors, Spirax-Sarco presents a current dividend yield of 2.5%. Even though the company operates in a cyclical industry, Spirax has demonstrated impressive resilience, consistently maintaining its dividend throughout economic downturns. This stability is due primarily to its diversified customer base and strong operational efficiency.
Over the past decade, Spirax Sarco has traded between 18x and 42x earnings. In recent years, the P/E has been skewing towards the higher end. Today, its P/E ratio sits at a more reasonable 23x, compared to its 10-year average of 28x. Spirax’s dependable cash flow and conservative payout ratio suggest its dividend is secure, even in challenging market environments. For long-term investors, there’s also the potential for stock price appreciation as earnings increase.
[PREMIUM] A deep dive into the Spirax Sarco| Newsletter #022 (europeandgi.com)
Dividend Stock #3: Ahold Delhaize (AD)
Ahold Delhaize is a multinational food retailer operating several well-known grocery chains across Europe and the United States. The company’s vast network of supermarkets and its expansion into online retailing have made it a dominant player in the consumer staples industry.
Ahold Delhaize offers a current dividend yield of around 3.6%, backed by stable earnings and consistent cash flow generation. The company’s payout ratio is below 60%. This suggests there is room for future dividend increases, especially as the company continues to expand its online and grocery delivery services.
The company trades at a reasonable P/E ratio of approximately 11, slightly below its historical average. With projected earnings growth of around 3% annually, Ahold Delhaize offers both income and the potential for capital appreciation. Over the next five years, investors could expect the share price to reach €35, alongside consistent dividend payouts, providing attractive total returns.
Conclusion
In the quest for solid passive income, dividend stocks can be a valuable part of your portfolio especially when paired with businesses that show financial strength and potential for growth. Companies like ASR Netherlands, Spirax-Sarco, and Ahold Delhaize offer a blend of generous dividend yields, resilient business models, and the likelihood of future dividend increases.
While yields are essential, assessing their fundamentals is crucial to investing in sustainable income streams. By focusing on well-established companies with robust earnings and growth prospects, you can build a reliable source of long-term passive income.
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