Friday, February 23

Spanish stock market: the queen of the dividend

Good news for dividend investors. According to a report from Allianz Global Investor, companies will continue showering their shareholders with billions this 2022. Especially generous will be the dividends in Spain, the region where they will grow the most.

And it is that the experts hope that shareholder remuneration grows in double digits in all the larger countries of Europe. For Spain, which has weathered the waves of the pandemic relatively well in recent months, the manager points out, the increase may be between 15 and 20 percent, above the European average which is between 10 and 13 percent (France, Germany and Italy).

In Britain, on the other hand, the dividend increase is likely to be more modest, averaging around 4 percent. According to de Vries-Hippen, Director of European Equity Investments at Allianz Global Investors, continuing Brexit-related burdens on the UK economy are taking their toll

From suspension to full recovery

The coronavirus pandemic brought the suspension of shareholder payouts by companies due to the increased uncertainty of the blockades and doubts about the recovery. One of the most affected sectors was the financial sector, since the European Central Bank (ECB) recommended the suspension of the dividend until September 2021.

Once this restriction was lifted along with the economic improvement, the companies recovered these payments. The Total dividends should increase, according to forecasts by Allianz Global Investors (AllianzGI), by 8 percent, to around €410 billion by 2022.

“Unlike the general economic picture, dividend payments in 2021 showed a pronounced V-shaped development,” explains Vries-Hippen.

“At around €378 billion, dividends in 2021 returned to the trend that had been maintained until 2019. And in 2022, they are likely to continue to rise, reaching a new record level of around €410 billion,” points out.

This fact was already advanced by Janus Henderson, who found that dividends soar in the third quarter: dividends increased by 22 percent year-on-year in the underlying rate to 403,500 million dollars, an all-time high for the third quarter. Worldwide, 90 percent of companies increased their dividends or left them unchanged.

Spain, leader in dividend yield

According to data from the Spanish Stock Exchanges and Markets (BME), Spanish companies increased the payment of dividends by 4.7 percent in year-on-year rates until November. In total, 17,083 million euros have been distributed through the four most used formulas.

At the start of the year, a dozen companies announced the payment of coupons to their shareholders, lor that it involved the disbursement of almost 3,000 million euros.

These actions allow Spain, according to Allianz analysts, to be in the top 5 of countries within Europe in terms of dividend yield and in third position if only the eurozone is taken into account.

Precisely, the fact that Spanish companies have a high dividend yield has attracted the attention of foreign investors, highlights from BME, which already owns practically 50 percent of Spanish shares, 16 points more than 13 years ago, point out from BME.

Dividends influence profitability

“As in the past, dividends made a substantial contribution to equity returns, especially in Europe,” says Hans-Jörg Naumer, Head of Global Capital Markets & Thematic Research.

The advantage of dividends is perceived, especially, in the long term. Naumer points out that “dividends provide stability to many portfolios, especially in years with negative price movements, since they can offset declines in whole or in part.”

In fact, in the period from 1976 to the end of 2021, about 34 percent of total stock returns were attributable to dividends.