Stocks with Exceptional Dividends. In times when Bunds only have negative yields, and the interest rates on bank deposits are close to zero, stocks with strong dividends have come into the focus of investors. Some values have a dividend yield that is several times higher than the return on conventional investments.
For a long time, dividends tended to be a shadowy existence in stocks. Anyone who bought stocks hoped above all for price gains. The distributions, on the other hand, were more of a minor matter and were at most seen as a signal of the economic stability and prosperity of the respective company. This has changed fundamentally in the persistently low-interest-rate situation. Today, stocks with high dividend expectations are, particularly in demand. Since dividend rates tend to be relatively constant, such stocks appear to offer something almost akin to fixed income security. But be careful – appearances are deceptive
The highest dividend yields – not necessarily the best
The dividend yield results from two parameters – the amount of the dividends and the market value of the company or – based on the individual share – the dividend amount and the share price. Both are subject to fluctuations. It is therefore not necessarily expedient to “stock pick” stocks that currently have the highest dividend yield or for which forecasts promise “rosy” dividend prospects. Although companies usually strive for continuous dividend policy and shy away from dividend cuts, the payout is still not guaranteed. Even “flagships” like Deutsche Bank cannot avoid them in a bad business situation. And what the price development looks like depends on a variety of factors – the company’s profit expectations, the market situation, the economy, etc.
Experience and empirical studies show that it is dividend stocks in the “upper middle field” that lead to the most sustainable returns. A “magic limit” is six percent. Market analyzes show that companies with yield expectations of up to six percent on dividends have generally met these in the past.
There is, therefore, some evidence that this will also be the case in the future. On the other hand, companies that forecast significantly more were unable to meet these expectations in the long term. A dividend yield of eight or ten percent is not excluded, but more of a “flash in the pan” than a permanent condition.
Implement your personal dividend strategy
Anyone who wants to pursue a personal dividend strategy for their investments should, therefore take a closer look and rely on stocks that are characterized by good dividend yields in the long term. There are certainly corresponding values in the DAX and MDAX. The alternative to this is funds that specifically focus on dividend stocks. There are also corresponding ETFs on, particularly inexpensive offer. Independent financial advice helps with the selection.