Saturday, May 28

Dividends continue to make room for themselves in portfolios

The increase in uncertainty derived from the health crisis led to the collapse of the distribution of dividends. First it was the banks, at the request of the regulators, who were forced to increase caution and together with them, several companies made the decision to suspend the payment of dividends to their shareholders until they achieved clarity on the effect of the crisis on their balance sheets. In this way, dividend records were around 220,000 million dollars since Close to 30% of the stocks included in the MSCI World announced the haircut during 2020.

With the global economic recovery and corporate profits came the return to shareholder remuneration. Thus, 2021 was the year of the return to the dividend, with growth of around 9% or some 378,000 million euros, still below the pre-pandemic level.

However, the dividends They promise to recover in 2022, at least that is what the recent corporate announcements suggest, causing that as the speculative fervor wanes raise the fervor of investors for defensive and high-dividend-paying stocks, as a protection strategy for their portfolios.

The index MSCI World High Dividend Yield has risen to its highest level since May against the benchmark index of global equities, outperforming the downtrend it had seen since fears of a widespread pandemic in 2020. This move suggests that for investors now a solid and stable income stream is more important than the prospect of capital appreciation.

The index returns around 6.2%, more than 2 percentage points above the MSCI AC World Index, and more than two percentage points above what you would get on the global bond gauge de Bloomberg.

The index this compound by a series of companies from various sectors, being the medical care and basic products the sectors with the greatest weight, with Procter & Gamble as one of the most representative weights and that on Wednesday its defensive characteristic was demonstrated by announcing its results and raising the prospects for sales and price increases that have allowed and will allow it to offset higher costs for the current year fiscal.

Current dividend yields are very attractive, with Europe significantly higher than corporate bonds, while in the US dividend yields and government bonds go hand-in-hand. And although this ratio is a reflection of the past, since it considers the latest dividend payments and prices as of December 2021, future prospects are favorable, with expectations of increases in dividend payments.

If we look at a global level, except in those countries where interest rates have already begun to normalize a few months ago (such as Brazil and some other emerging countries), there are countries where the dividend yield is extremely attractive, as is the case of Spain. Even, according to the Allianz GI note, it is estimated that The payment of dividends in Spain could grow between 15% and 20% in this 2022, more than would grow in other European countries such as Germany, France and Italy, where the increases would be between 10% and 13%, according to calculations by the manager Allianz Global Investors, which also forecasts a new record in the payment of dividends in Europe in 2022, increasing 8%.

as it points Hans J√∂rg Naumer, global director of Capital Markets and Thematic Analysis, “dividends provide stability to portfolios, especially in years with negative price developments, being able to offset falls in part or in full. In addition, the average volatility of company shares that pay dividends is significantly and systematically lower, a difference of more than 10 pp for the European market”.

What options does the investor have to take advantage of these expectations?

On the one hand, as always, there is the possibility that the investor buys shares of those companies with the highest dividend yield and is aware of the moment in which they pay, as if they do not pay. However, we are always committed to diversification and the analysis of those companies with the capacity for the recurring payment of dividends, taking care of their financial health. That is why the other options that the investor has is via funds.

Several Spanish fund managers have funds whose investments are in companies with a track record of paying dividends:

But there are also international managers and ETFs with investment alternatives that range from investing in European companies and more diversification through the selection of global companies that pay dividends. The graph allows the naked eye to see the past results achieved by these managers, which although they do not guarantee future results, they do give certain signs of consistency.