After a slow August in terms of dividend payments from the largest European companies, September looks more interesting.

Each month, we screen the 100 largest European companies by market capitalization in the Morningstar Europe Index to see which ones are due to pay a dividend. This time, the list is full of UK companies. Of the 16 companies we have identified that will pay a dividend next month, 14 are British.

Here is the list.

Key Morningstar Metrics for AstraZeneca

Analyst: Jay Lee

Jay Lee, equity analyst for Morningstar, says:

“Regarding distributions, we view Astra’s dividends and share repurchases as about right. Despite working through a tough patent cliff, the company has maintained its dividend despite the payout ratio climbing above the industry average of close to 50%. As earnings have grown rapidly over the past couple of years, the payout ratio has returned close to the industry average of about 50%, which should allow for the firm to maintain enough cash to support heavy R&D investment and fund acquisitions to augment internal pipeline development.”

“On the share repurchase side, Astra hasn’t redeployed capital in a major way, which arguably missed an opportunity to buy shares at low values in the mid-2010s, but we believe the capital was correctly prioritized toward R&D, which led to the firm’s strong operating performance.”

Key Morningstar Metrics for Lloyds Banking Group

Analyst: Niklas Kammer, CFA

Niklas Kammer, equity analyst for Morningstar, says:

“The bank has an adequate common equity Tier 1 ratio, and we believe it is following a sound shareholder distribution policy. Under its previous management, Lloyds de-risked its balance sheet and improved its funding base. The acquisition of MBNA also supported net interest margins and helped diversify the bank from an over-reliance on mortgage loans.”

Key Morningstar Metrics for RELX

Analyst: Rob Hales, CFA

Rob Hales, equity analyst for Morningstar, says:

“RELX returns capital to shareholders through a combination of dividends and buybacks, which we think is appropriate given its business fundamentals and relatively mature end markets. Buybacks are regular, not opportunistic. Given its relatively stable business and low uncertainty, we think most buybacks will be completed at around fair value and therefore will not have a material impact on the valuation.”

Key Morningstar Metrics for Unilever

Analyst: Diana Radu, CFA

Diana Radu, equity analyst for Morningstar, says:

“We think shareholder distributions are appropriate. Dividends have been the preferred vehicle for returning capital to shareholders, and Unilever has delivered slightly above-industry-average payout ratios of around 60% over the last decade.”

“Share repurchases have also been an important use of surplus cash, especially following more sizable asset sales, and we think they have generally been carried out at a level that has created value for shareholders. We expect the firm to maintain its high dividend payout ratio and to be opportunistic when it comes to repurchasing shares. However, tuck-in acquisitions will probably remain a higher priority, particularly in the beauty and wellbeing space. Larger, transformative acquisitions are off the table.”

Key Morningstar Metrics for NatWest Group

Analyst: Niklas Kammer, CFA

Niklas Kammer, equity analyst for Morningstar, says:

“We believe NatWest has sufficiently de-risked and decluttered its balance sheet. As a result, the bank has been able to return significant portions of its capital to shareholders that was previously put to poor use. We also believe that the shareholding by the UK government no longer poses a material threat of detracting management from focusing on shareholder value. Last, we believe NatWest’s distribution policy of a clear 50% dividend payout ratio coupled with share buybacks using excess capital is prudent given shares still trade below book value.”

Key Morningstar Metrics for Barclays

Analyst: Niklas Kammer, CFA

Niklas Kammer, equity analyst for Morningstar, says:

“The bank has an adequate common equity Tier 1 ratio and solid balance sheet. Barclays’s decision to return excess capital to shareholders in the form of share buybacks since the pandemic is a positive in our book. In general, we view it favorably that management is open to a flexible capital distribution approach.”

Key Morningstar Metrics for London Stock Exchange Group

Analyst: Niklas Kammer, CFA

Niklas Kammer, equity analyst for Morningstar, says:

“LSEG’s dividend policy of paying out 33%-40% of adjusted earnings is prudent. It is also committed to distribute excess capital to shareholders via share buybacks.”

Key Morningstar Metrics for Rolls-Royce Holdings

Analyst: Loredana Muharremi

Loredana Muharremi, equity analyst for Morningstar, says:

“With improved free cash flow, Rolls-Royce has reintroduced shareholder distributions, declaring its first dividend in over five years of GBX 6 per share payout for 2024. The company has committed to an annual dividend payout ratio of 30%-40% of net profit, aligning with industry benchmarks.

“Moreover, Rolls-Royce announced a GBP 1 billion share repurchase program, marking its first buyback in a decade. The buyback will be fully funded by free cash flow, ensuring no additional leverage is taken. Given Rolls-Royce’s improving fundamentals, additional buybacks may be considered in future years, contingent on ongoing financial performance.”

Key Morningstar Metrics for Reckitt Benckiser Group

Analyst: Diana Radu, CFA

Diana Radu, CFA, equity analyst for Morningstar, says:

“Reckitt’s approach to shareholder distributions is appropriate. Reckitt has a progressive dividend policy and has increased dividends by 5% per year over the last two years, which we expect will continue over the midterm. Since October 2023, the company launched two share buyback programs for the amount of GBP 1 billion each.”

Key Morningstar Metrics for BP

Analyst: Allen Good, CFA

Allen Good, equity analyst for Morningstar, says:

“We rate BP’s shareholder distribution policy as appropriate. The variable shareholder return model is better suited to BP’s new strategy and for potential commodity price volatility. Its new program calls for dividend growth contingent on the oil price, with repurchases using the remainder of the 30%-40% of cash flow earmarked for shareholder returns.”

“This should ensure that the dividend remains safe even at lower oil prices while setting investor expectations for returns at higher prices when BP is likely to generate greater amounts of surplus cash. By not steadily growing the dividend unless warranted, BP should avoid the situation it faced in the past, where the payout grew to unmaintainable levels over time.”

Key Morningstar Metrics for Glencore

Analyst: Jon Mills, CFA

Jon Mills, equity analyst for Morningstar, says:

“With the balance sheet in good shape, we expect a greater share of free cash flow to find its way to shareholders. The company’s policy of paying a base distribution based on prior-year cash flows plus potential additional (or top-up) shareholder returns (including share repurchases and/or further distributions) to the extent net debt doesn’t exceed its USD 10 billion target is appropriate, in our view.”

Key Morningstar Metrics for Shell

Analyst: Allen Good, CFA

Allen Good, equity analyst for Morningstar, says:

“We rate Shell’s shareholder distribution policy as appropriate. After it cut its dividend in 2020, management introduced a variable shareholder-return model, which is better suited to its new strategy as well as to potential commodity price volatility. Shell will return 40%-50% of operating cash flow to shareholders through dividends, including 4% annual growth, and repurchases. This should ensure that the dividend remains safe even at lower oil prices while setting investor expectations for returns at higher prices when Shell is likely to generate greater amounts of operating cash.

“Although Shell is steadily increasing its dividends, it does so at a much reduced level. As such, we do not see Shell repeating the situation it faced in the past, where the payout grew to unmaintainable levels over time.”

Key Morningstar Metrics for Compagnie Financiere Richemont

Analyst: Jelena Sokolova, CFA

Jelena Sokolova, equity analyst for Morningstar, says:

“We consider Richemont’s Morningstar Capital Allocation Rating as Standard, with a very sound balance sheet, fair investment strategy and execution, and somewhat low shareholder distributions, given the high amount of cash on the balance sheet.”

Key Morningstar Metrics for Eni

Analyst: Allen Good, CFA

Allen Good, equity analyst for Morningstar, says:

“We rate Eni’s shareholder distribution policy as appropriate, given the introduction of a flexible payout program for dividends and repurchases that is tied to cash flow. By tying payouts to cash flow, the plan provides flexibility when prices are low, decreasing the likelihood Eni will need to cut its dividend as it has in the past. It also communicates clear expectations to investors.”

Key Morningstar Metrics for HSBC Holdings

Analyst: Michael Makdad

Michael Makdad, equity analyst for Morningstar, says:

“HSBC has been making large shareholder distributions in the past few years as its earnings improved, which we view as appropriate.”

Key Morningstar Metrics for Rio Tinto

Analyst: Jon Mills, CFA

Jon Mills, equity analyst for Morningstar, says:

“We think Rio’s recent capital discipline will continue, the balance sheet will remain sound and shareholder distributions will be appropriate.”

The author or authors do not own shares in any securities mentioned in this article. Find out about
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