STOCKS NEWS EUROPE-M.Stanley eyes stocks with DY above P/E

Twelve percent of stocks in the MSCI Europe .MSCIEU, three times the long-term average, currently have trailing dividend yields (DY) above their trailing price-to-earnings ratios (P/E), Morgan Stanley says in a European equity strategy note, classifying such stocks as "value opportunities".

Stocks in this category include BP (BP.L), Vodafone (VOD.L), Banco Santander (SAN.MC), Royal Dutch Shell's B-shares (RDSb.L), ENI (ENI.MI) and BBVA (BBVA.MC), it says.

"Stocks with DY above P/E outperform on average by 28 percent over a 24-month horizon," Morgan Stanley says.

"Although an average stock tends to outperform the market by 28 percent over a 2 year period, only 60 percent of companies outperform. This is precisely the crux of the 'margin of safety' principle for value strategies -- winners win big, and losers lose small as they are cheap to start with," it says.

Reuters Messaging rm://peter.starck.reuters.com@reuters.net