Eoin Treacy's view Following what can conservatively be described as a trying few months for European shares, I thought it would be timely to attempt to identify companies that have a reasonable dividend and the potential to keep paying it.

The Stoxx 600 Index yields 3.84% so I conducted a Bloomberg search for constituent shares with a dividend yield of more than 4%. In an effort to filter out those whose yields have been unduly flattered by the recent decline I made a cash dividend cover ratio of greater than 1 an additional requirement. The results were quite educative because of the 56 qualifying shares only 10 were from the Eurozone while 45 are listed in the UK.

BBVA is one of the more interesting because it is the only bank in the Eurozone that generates more revenue from outside the EU than from inside it. (Also see Comment of the Day on January 10th). The share currently has an indicated gross yield of 5.27% but has been aggressively cutting its pay-out and diluting its shares over the last couple of years. It found at least short-term support in the region of the 2009 low last month and has since rallied to almost completely close the oversold condition relative to the 200-day MA. A sustained move above the MA will be required to signal a return to demand dominance beyond the short term.

The performances of Vinci (4.8%) from the construction sector, CRH (4.13%) from the cement sector, Royal Dutch Shell (5.21%) and Total Fina (6.42%) from the oil sector are all heavily influenced by perceptions of global growth potential. They all pulled back sharply over the last few months and found at least short-term support in June. They would need to sustain moves below their respective June lows to question medium-term scope for additional higher to lateral ranging.

I last reviewed European utilities in Comment of the Day on June 15th. The UK sector has been a relative outperformer. Both National Grid and Drax Group appear in the above list. While not in the above list RWE, E.ON, GDF Suez, Enel Green Power, Acciona, Gas Natural and Fortum all found at least short-term support in June and sustained moves below those respective lows would be required to check potential for an additional unwind of short-term oversold conditions.

The European Telecoms sector also exhibits a wide disparity between the performance of Eurozone and non-Eurozone domiciled companies. BT Group, Vodafone and SwissCom retain positions of relative outperformance. (Also see Comment of the Day on May 3rd. However, Telecom Italia, Portugal Telecom, Deutsche Telekom, France Telecom, KPN, Telekom Austria, Belgacom and Telefonica have all found at least short-term support and clear downward dynamics would be required to check potential for a further unwind of oversold conditions relative to their respective 200-day MAs.

The ramifications of the decision to form a Eurozone banking union are still being sifted through. The initial response from markets has been positive, and while nothing was mentioned about a grand plan for further fiscal cohesion, what has been decided can be viewed as a solid first step in that direction. The belief that the Eurozone project will persist has been bolstered. This suggests that companies essential to the smooth operation of the Eurozone economy, which have been beaten down, now have potential to at least unwind their respective short-term oversold conditions.