European equity yields trump corporate bonds

Added 20th July 2015

Currently some 70% of listed European equities have a dividend yield higher than European credit, according to Stan Pearson, head of European Equity at Standard Life Investments.

European equity yields trump corporate bonds

European equity yields are around 3%, and there are many examples of companies yielding over 5%, said Pearson, who manages the European equity team as well as the European Equity Unconstrained (SICAV) Fund.

Pearson, on a recent trip to Hong Kong, said that the outlook for Europe is not as bad as the headlines suggest.

He cited several negative perceptions about the Eurozone economy, including zero growth, the lack of reform, the euro is doomed.

He countered that growth is evident in many key companies such as Ryanair, publisher Relx (Reed-Elsevier), Swedish lock manufacturer Assa Abloy and and Norwegian telecom firm Telenor. Moreover, several Eurozone companies, for example Nokia and PSA Peugeot Citroën, have been forced to restructure.

“Market earnings growth is materializing,” he said, citing as earnings drivers the fall in oil prices, the weak euro versus the dollar and the low cost of funding due to the European Central Bank’s robust QE program.


 ource  presentation Source: SLI presentation


The consumer products, financial and TMT sectors make up roughly 60% of Pearson's European Equity Unconstrained fund as of June 30, according to FE data. Europe accounts for about 65% of the weighting and UK is around 34%.


 ource Source: FE


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