Minority investors like their dividend yield
Spanish minority investors like dividends. The Spanish stock market was the third-largest in the world in terms of dividend yield in 2019 among the 33 largest stock market indices that make up the index provider MSCI. The dividend yield of the Continuous Market reached 4.5%, only behind the Russian and British stock markets and tied with the figure of the Norwegian stock market.
According to a report by Allianz Global Investors, the Russian stock market had a dividend return of 6.7%, the UK stock market achieved a return of 4.6% in 2019. At the beginning of December 2019, the average dividend yield in all segments of the European market was about 3.7%, compared to lower performance by Wall Street companies that have a strong tendency to launch share buybacks.
Among the companies with the highest dividend yields in the IBEX 35 at present are ACS (9.8%), IAG (Iberia) (8.7%), Enagás (6.7%), Telefónica (6.6%) and Repsol (6.45%).
Analysts at Allianz Global Investors stress that investment through dividends is an opportunity at this time, compared to the fixed-income market. There are currently more than 16 trillion dollars in bonds with negative returns, representing 29% of all investment-grade fixed-income assets worldwide, figures at the end of August 2019.
Beyond German debt, Nestle N issued the first 10-year corporate bond with a negative return. In Germany, yields are below 0% for approximately 90% of outstanding government bonds. The percentage for the eurozone is 60%. In fixed income, investors are focusing on dollar issues, high yield, and emerging bonds.
The German management company points out that investment through dividends can eventually create value in the investors' portfolio and from a historical perspective dividends have been more stable than corporate profits themselves, which generates a stabilizing effect on portfolios.
They also point out that the shares of companies that pay dividends have been shown to be less susceptible to volatility than companies that do not pay dividends, which are usually smaller and focused solely on business growth.
From Allianz Global Investors, they cite a 2005 study that shows that CFOs strive to achieve a long-term dividend, avoiding dividend cuts, since according to this study a reduction in shareholder payments is usually associated with a drop in the stock market.
"The dividend sends an extraordinarily strong signal to the market. A reduction in the dividend or an absence of the dividend casts doubt on the future viability of the company," they point out.
Analysts at the German company also indicate that companies with high dividend yields usually have stable cash flows and a strong long-term relationship with their core shareholders.