Dividend stocks that offer regular payouts and potential price gains are currently not the focus of investor interest. Getty Images North America
Companies worldwide are paying out $1.72 trillion in dividends, a record high.
According to Jan Viebig from Oddo BHF, dividend stocks are attractive in times of stagnating price developments.
Investors can specifically select stocks to receive regular dividend payments.
It’s raining money almost every day right now. Credits arrive in the portfolios of millions of investors, paid out by the companies in which they have invested. The companies are now distributing part of their profits from last year. It’s dividend season.
Interest in dividend stocks has recently declined. Since interest rates have returned, many savers have increasingly turned to daily or fixed-term deposits in order to receive regular income. But that’s a bad idea in the long term, after all, stocks also offer the chance of increasing value.
In order for this bet to work, it depends on the selection of companies. With the right combination, savers can receive both increases in value and regular payouts, including a monthly extra from the stock exchange.
According to calculations by the investment company Janus Henderson, companies will distribute around 1.72 trillion US dollars (1.58 trillion euros) worldwide this year. That is around 3.9 percent more than in the previous year – a record. The 100 largest German companies will probably pay out a little more than 60 billion euros. Although this is slightly less than in 2023, it is still a generous sum. The return based on share prices will be around 3.4 percent.
This makes many savers weigh things up: There are now higher returns on a number of overnight money offers, and the interest is often not only paid once a year. For example, the neobroker Trade Republic offers four percent on savings and pays interest monthly. So why expose yourself to the risk of price fluctuations when such high returns can be achieved without much risk?
One reason is that the high interest rates will soon be over. The European Central Bank (ECB) will most likely cut interest rates again for the first time in June. This development has already been anticipated in the fixed-term deposit market. At the end of December, a number of banks were offering up to 4.2 percent for two years, but the offers are now at least 0.5 percentage points lower.
At the latest when the maximum achievable interest rates have returned to the level of the dividend yields, the corresponding stocks will again become an interesting alternative, even when purely comparing returns.
Dividend stocks could soon show their advantages
Stocks also offer the opportunity to increase in value – and that applies to dividend stocks right now. “In times of strong price gains, the shares of companies that regularly pay out high dividends are usually in little demand,” says Jan Viebig, chief investment strategist at the investment company Oddo BHF. “Because these stocks tend to underperform the market in the up phases on the stock market.”
That was also the case recently. But when, as is currently the case, price development stagnates, dividend stocks can demonstrate their advantages. “They offer investors the promise of regular participation in the company’s profits, regardless of price fluctuations,” says Viebig.
Particularly interesting are companies that make regular distributions, but whose prices at the same time appear to be undervalued. Fernando Luque from the Morningstar rating agency looked for exactly such papers and identified eleven stocks in Europe.
These 11 dividend stocks may be worth investing in
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