350 billion euros for shareholders
In troubled times on the stock market, dividend payments can save many portfolios. There are some good payers – even at discount prices, my asset manager.
NThe dividend season that is now beginning promises to be lucrative, and not just in Germany. For the DAX companies alone, analysts assume that they will distribute the record value of around 38 billion euros for 2018 from their profits to shareholders.
According to estimates by the fund company Allianz Global Investors (GI), investors in Europe, as measured by the MSCI Europe share index, are even awaiting dividend payments of around 350 billion euros, another high. This would mean that these groups would pay out around 16 billion euros or 4.8 percent more than in the previous year.
Continuity is essential
However, it is not just the amount of the distributions that should be decisive for investors. “For us, the continuity of dividend payments is just as important as the relative amount,” says Jörg de Vries-Hippen, Allianz GI’s chief investment strategist for European equities. Because a positive combination signals a healthy foundation. Such companies often proved to be stable anchors in stormy times. And there are some companies with well-supported dividends and growth potential – even at discount prices.
Market setbacks could offer opportunities to buy. One focus of Allianz GI is on the European energy sector, as the significant restructuring is likely to pay off in the foreseeable future in higher liquid funds and dividends. For years, de Vries-Hippen has counted insurers among the “dividend classics”.
In the investor’s custody account, distributions have a kind of “airbag function”, which can have a particularly beneficial effect, especially in view of the uncertain market situation, the asset manager continues. Dividends could stabilize the portfolio because they cushion price losses and create predictable income.
According to an analysis by Allianz GI, dividends have made up around 41 percent of the total return on European stocks since 1973. This would have enabled them to partially or fully compensate for price losses. In addition, European companies with an average dividend yield of 3.8 percent at the end of 2018 are considered distribution-friendly.