With an increase of 14.5% to EUR 48.7 billion, the companies of Germany’s HDAX will distribute more money to shareholders in 2018 than ever before. Indeed, this figure is as much as EUR 2.2 billion higher than our most recent estimate. The overall picture is very positive. For example, 68% of companies in the HDAX have announced a higher distribution than the previous year – in some cases, much higher – while just 6% of companies have cut their dividend.
The dividend yields predicted for 2018 have recently been seesawing in line with share price volatility. As things stand, the 2018 dividend yield on the DAX is expected to be 3.2%, on the Euro Stoxx 50 3.7%, and on the Stoxx 600 3.5%. In all cases, these yields are higher than last year’s average. Even taking a longer-term view of 15 years, the expected dividend yields are close to the median level, and therefore look much more appealing than they did just a few months ago. Against a backdrop of rising corporate earnings and dividends, this represents an attractive level.
Equity investments in Europe currently offer a generous yield pickup on bonds. In the case of the DAX, this pickup amounts to some 200 basis points. Investors are therefore being handsomely rewarded for the additional risk they are taking on. By contrast, the tide has turned in the US in recent months. Interest rates have risen sharply, to the point where they are now higher than dividend yields.