Dividend yields more attractive than ever before

In recent months, share prices have fallen much more sharply than the expected dividend payments. As a consequence, dividend yields have risen noticeable. The DAX and Euro Stoxx 50 are signalling levels of 3.7% and 4.3% respectively, way above the historical levels. At the same time, yields on bond markets have fallen sharply in recent months. The yield premium of DAX dividends over ten-year German government bonds has thus reached a new record high of 3.1 percentage points. Dividends are therefore attractive – both in absolute and relative terms.

All in all, the new year started off calmly for stock markets which are recording clear gains. However, nothing has changed in the difficult underlying conditions: the political uncertainties continue to exist in many different forms and sizes. Only the market – after our stock market barometer had plunged deep into negative territory at the end of the year – is now also taking a careful look at the positive news again.

Anyone acutely disturbed by the high volatility on markets, with no interest in monitoring stock market prices every day and able to brush aside the short-term fluctuations on the markets is suitable for dividend strategies in the long term. Dividends are far more stable than share prices and profits, even though they are also not entirely immune to cyclical fluctuations. In the current environment featuring a marked deceleration in the pace of growth, it is even more important to rely on sustainable dividend payers. Our dividend aristocrats therefore remain first choice.

 

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