- According to the study on dividends by Allianz Global Investors, Dividend Report 2019, companies in the MSCI Europe paid around 350,000 million euros in dividends in 2019
- European businesses are particularly prone to dividend payments compared to other markets, with yields of around 3.8% on average
- Dividends account for about 41% of the total performance of European actions since 1973
By Funds Society, Madrid
In an uncertain political environment, dividends will continue to bring stability to investors in 2019, according to a new study by Allianz Global Investors. The data that the document shows show that, in the last 45 years, dividends have represented around 41% of the total yield of European shares.
The 2019 dividend report of Allianz Global Investors, which analyzed the performance of dividends from major markets around the world, states that European companies are particularly prone to dividend payments compared to other markets, with returns around 3.8% on average. At the end of 2018, and in the 45 years since 1973, the return on European stock dividends has been around 3.8% on average across the market compared to 3.2% in North America and the 2.0% in Asia Pacific – data according to the MSCI Europe-. In Europe, in 2018, the average dividend yield was higher in Portugal with 5.36%, followed by the United Kingdom with 4.97% and Spain, which came in fourth with 4.65%.
The experts at Allianz Global Investors expect companies in MSCI Europe to pay around 350,000 million euros in dividends in 2019. This would mean that European companies would pay some 16,000 million euros (4.8%) more to their shareholders than in the previous year, which would represent another consecutive record.
The report also shows that it is not only dividends that provide the most stability for investment in equities. Stocks with high dividends appear to behave in a much less volatile way than those with companies with lower dividend payments. In particular, the volatility of US companies that pay dividends is significantly lower compared to companies without dividend payments, and since the 1990s a similar trend has been observed for European shares with dividend payments.
European equity markets
However, as the European economy threatens to weaken, there is also uncertainty regarding the tightening of global trade conditions that are likely to affect European equity markets.
The level of dividend payments is not the only decisive factor in the selection of shares of the fund manager. Jörg de Vries-Hippen, CIO Equity Europe and fund manager of Allianz Europe Equity Dividend , says that “as active managers, we take advantage of the market downturns as buying opportunities to expand the most promising positions in the portfolio. Continuity in dividend payments is as important as its relative level, because a positive combination indicates a healthy base, and these companies often demonstrate stability in turbulent times. “
The manager considers that, at present, there are some companies in the market that pay dividends, well financed and with growth potential and that, after the market falls in the last months, they quote with a discount. In this sense, it highlights, as an example of this, the European energy sector, since its restructuring should foreseeably materialize in the future through a greater generation of cash and more solid dividends. De Vries-Hippen has considered insurance companies to be “the classic dividend payers” for many years.
On forecasts for Europe, Jörg de Vries-Hippen says: “We expect economic growth in Europe of around 1.5% in 2019. But as the global liquidity valves close, the pressure will increase. the economy not only affects highly indebted countries such as Italy, it also affects the reliable engines of the EU, such as France and Germany, which are suffering from growing internal unrest and international disputes, the EU is vulnerable and the ups and downs of the income markets European variable will also depend on how the Brexit eventually develops. “
For his part, Hans-Jörg Naumer, director of capital market analysis and co-author of the study , states that “dividend payments act as an airbag in the investor’s portfolio, which can have a particularly beneficial effect, especially when the The market situation is less favorable, as we have seen in Europe: Dividends stabilize the portfolio because they cushion the setbacks in prices and generate predictable income.”