Eoin Treacy's view In looking at companies that pay a reliable dividend, rather than simply focusing on those with the highest yield or those with the highest dividend coverage, we get some interesting results. Many companies have talked of paying dividends as an inefficient use of capital and if the management are clones of Warren Buffett this might be true, but for the vast majority this is simply not the case. Returning cash to investors is a laudable aim, helps to keep management focused on investor and contributes considerably to total return over a number of years.

I examined an index of European shares that have been increasing their dividends for the last 10 consecutive years. A significant number are based in the Consumer Cyclical or Consumer Non-Cyclical sectors. High yielding shares are generally active in high cash-flow sectors such as Energy, Banks or Utilities but while these are represented in this index, almost half offer exposure to consumer growth.

For those limiting their perspective to the USA or Europe this might seem an odd circumstance. However, companies with a global franchise offer an excellent avenue to the expansion of the global middleclass which is driving world beating economic growth in Asia and Latin America. Cash-flow, growth and relative outperformance would seem to be the holy grail of investing and yet it can be found in a number of the shares contained in this index.

The S&P Europe-350 Dividend Aristocrats Index has 47 members and is described thus:

The stocks within the S&P Europe 350 Dividend Aristocrats index are equally weighted. Each quarter, the weightings of the constituents are re-adjusted back to equal weight. The rebalancing coincides with the quarterly share adjustments of the S&P Europe 350. Guidelines, as well as research and policy statements, can be found on the Web site at www.indices.standardandpoors.com.

THE "ARISTOCRATS"
S&P Europe 350 Dividend Aristocrats is a measure of true blue chip companies. These companies are current members of the S&P Europe 350, have been consistently paying increasing dividends year after year for 10 years, have a float-adjusted market capitalization of at least US$ 3 billion and have an average daily trading volume of at least US$ 5 million.

The S&P Europe-350 Dividend Aristocrats Index has been outperforming the S&P Europe 350 since July 2009 and while it has lost relative momentum over the last year, the dominance of reliable dividend paying shares remains in place. This chart originating in Bloomberg shows the total return of the two indices and the relative outperformance of the former. In absolute terms, the S&P Europe-350 Dividend Aristocrats Total Return Index broke upwards to new recovery highs two weeks ago and a sustained move below the 200-day MA, currently in the region of 145 would be required to question potential for continued upside.

UK shares dominate the S&P Europe-350 Dividend Aristocrats Index with 22 entries. Among these, consumer related shares carry the largest weighting. Subscribers will be familiar with out comments on AstraZeneca, British American Tobacco, Unilever, Royal Dutch Shell and Vodafone.

The results of this High / Low Filter for the 47 shares in the Index shows 5 making new all time highs in the last 5 days with a total of 19 making at least new 3-month highs.