Companies increase their shareholder remuneration thanks to improved balance sheets and as a claim against fixed income rates.

Companies increase their shareholder remuneration thanks to improved balance sheets and as a claim against fixed income rates.

Companies increase their shareholder remuneration thanks to improved balance sheets and as a claim against fixed income rates.

Golden piggy bank.

The Spanish listed companies shine to one of its most characteristic insignia: the dividend. In the heat of the improvement in their business figures, more and more companies are announcing a more generous shareholder remuneration policy with the aim that their profitability is up to the rates that some fixed income issues.

The change of discourse of the central banks has become enemy of dividend investment strategies that so many followers had achieved in recent years. And it is that the search for the best returns in terms of shareholder remuneration had become an effective antidote to the persistent interest rates at historical lows.

Now with rises in official rates in such a close horizon like a couple of weeks -as is the case in the US-, the escalation of the coupon of sovereign and corporate bonds puts on the table new alternatives for investors with a more conservative and rent-seeking profile. A circumstance to which the listed companies have reacted with agility.

Balance Recovery

The director of investment and product solutions at Mutuactivos, Ignacio Dolz de Espejo, points out that “an important part of the impact” of the rate hikes planned for the coming months has already occurred in the fixed-income portfolios of many investors. A scenario that, in his opinion, “makes the accrual of their positions may begin to be attractive”.

With the easing of the crisis over the past year, the Spanish listed companies have already achieved improve the prize to its investors thanks to more comfortable business figures and the release of provisions and precautions that they had to carry out in 2020, when it was completely impossible to calculate the impact of the pandemic on their balance sheets. Thus, they distributed nearly 17,000 million euros in dividends, 5% more than in the previous year.

Given that the health situation has continued to improve and the economic recovery continues, the forecasts for 2022 are more than kind in this regard. And that’s not counting the added effort that some listed companies will make to continue to be more attractive for its shareholders than a transfer of its bet towards a portfolio of fixed-income securities.

It should also not be forgotten that the profit sharing restrictions in sectors such as banking and insurance have finally eased, with which financial securities -so heavily represented on the Spanish stock market- can back to normal also in this chapter. So much so that from Allianz Global Investors it is expected that the dividends of the Spanish stock market could fatten up to 20% this year.

generosity and potential

In this context, Natalia Aguirre, director of analysis at Renta 4 Banco, points out that “although fixed income offers increasingly higher returns, we do not believe that these will pick up much more, to the extent that the withdrawal of the central banks is going to be very gradual”. Thus, it considers that if the dividend yield is added to the upside potential of many listed companies more generous on this account, the strategy remains attractive.

Currently, the entity’s Dividend Portfolio accommodates Acerinox, BBVA, Endesa, Faes Farma, Logista, Merlin Properties, Repsol and Telefónica. Among them, some of those that in recent weeks have reaffirmed or improved their remuneration policy. And all with returns for this concept of between 4% and 8%, which by itself also represents a good pinch against runaway inflation.

The different speed of withdrawal that central banks have set of the USA and the Eurozone becomes a point in favor of this investment strategy in the Old Continent. The independent financial advisor Víctor Alvargónzalez considers that “the dividend of the European stock market -close to 3% on average- is still much higher than the coupon paid by the bonds” region of. And without forgetting that if profits continue to increase, “dividends will also adapt upwards”.

A gap that, as explained by the also founder of Nextep Finance, is no longer perceived in the North American stock market, where “the yield per coupon is equaling the interest rate of the bonds”. However, he also points out that on Wall Street “the shareholder is remunerated largely by way of share buybacks”a practice increasingly replicated on this shore of the Atlantic.

The impact on bonds

The managing partner of atl Capital, Ignacio Cantos, focuses on this trend, which makes the 4% dividend yield that the Ibex 35 already points to this year more attractive. companies of comparable quality it does not reach 1% in a five-year investment”.

In this context, Cantos also raises the question of “how far will bonds go up”. Although he considers that “it does not seem like it will be up to a very high level”, he does remember that any movement in this sense translates into “losses in the price of the bond if we want to sell it”.

Within this same line of discourse, Alvargonzález points to the fact that “most people use investment funds to bet on fixed income instead of investing directly in bonds. In this way, “when interest rates rise, the price of bonds falls and, therefore, that of funds”. With its consequent impact on the final yield of each saver’s position.

One of the favorites of atl Capital to continue betting on the dividend as a means of profitability for the investment portfolio is Repsol, which, coinciding with the presentation of its accounts, announced an improvement in this concept of up to 5%. Along with her they place Telephonewhich remains faithful to dividendAlready DHWin which Cantos sees “some extraordinary” possible given the volume of cash that it treasures.

Beyond the ‘blue chips’

However, this quest for the dividend should not be limited to just the big names on the Spanish stock market. This is hinted at by Kasper Elmgreen, director of equities at Amundi, who encourages investors to “Adopt a Real Returns Mindsetwhich means exploring companies that can preserve profit margin growth and continue to offer sustainable dividends.”

Something that will also have its reflection in the small cap listed companies. The numbers of recent years have reflected this circumstance among the small caps Spanish. And this time, the situation could be more remarkable considering that, as he points out, “Profits tend to turn into dividends about a year late.. In other words, this 2022 touches the distribution of the best figures achieved throughout the past year.

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