The dividend yield of the Ibex-35 is now at 4.28%, is the highest among the major international indexes. Spanish listed have distributed more than 200,000 million euros since 2009. The Spanish Exchange defends his world title as king of dividends. Payments to shareholders have such weight, even while the index has given up 35% of its price since the beginning of the crisis in 2007. But the index has gained a 1% since 2007 if we take the dividends into account.
The current dividend yield of the Ibex-35 is 4.28%, the highest among major global indices. A privileged position he has held since 2009, when he snatched first place the Italian Mib. From that year until October, the Spanish listed have distributed more than 200,000 million euros, about 28,500 million a year. Companies like Repsol, with a dividend yield expected in 2016 of 9%, Telefonica and Endesa, with expected rates above 6%, have some of the most attractive remunerations at European level.
These high dividends have been an important claim to attract shareholders in recent years, marked by uncertainty. The dividend tends to indicate that the companies that distribute are solid, make profits and are willing to share with its shareholders. In addition, the current scenario of low interest rates, which have yields evaporate debt and deposits, has reinforced the appetite for securities with attractive dividend yields. When interest rates are very low, dividends can be an alternative for good profitability.
Nevertheless, sometimes high dividends generate suspicion among analysts and investors. Sometimes to give dividend it is not seen as a good sign, since those who invest in a business have the idea that are lending money to the company which will do something with it to get bigger. However, history shows that companies that distribute high dividends offer a more long term than non-profitability.
The weight of the banking
In the privileged position of Ibex in the ranking of dividend yield issues affecting its own membership. The sector with more presence in the Ibex is banking, which has suffered this year as throughout the crisis, through severe corrections. This raises its dividend yield ratio, since it is more profitable to pay for a cheaper stock. So, if in 2014 the dividend was at 4% and the stock falls in price a 50% then if the same dividend is maintained during 2015 then the new investors will get an 8% return.
The directors of banks have seen the dividend as a source of livelihood capital investors. In addition, they also have a considerable weight sectors such as electricity, whose incomes are stable, predictable and little growth so the payout (percentage of profit destined to dividend) is very close to 100%. To this we must add that in the Spanish stock market has expanded in recent years the practice of scrip dividend, which gives investors the option to receive their dividend. This practice has been used in the last year Santander, Repsol, Telefonica and BBVA, among others.
However, in markets like the US, many companies replaced the dividend per share buybacks, which is a way of increasing earnings per share,” says Rafael Hurtado, professor of Cunef. Therefore, the Ibex has twice the dividend yield of the S&P 500, but that does not mean that the US index is twice as expensive than the Ibex.
All this does not prevent that the dividend yield of the Spanish stock market this year has fallen to its lowest level since 2007, enabling him approaching other major indices. In fact, estimates for 2016 compiled by Bloomberg placed the British FTSE ahead. The dividend has ceased to be a differentiating factor for the Spanish market. This decline dividend has been instrumental cuts announced this year by Banco Santander, which happens to pay 0.2 euros per share against the previous 0.6. The situation of the banks affected by the higher capital requirements by regulators, is one of the issues that generated more uncertainties for dividends in Spain. Doubts about Repsol payments if oil prices remain at very low levels, or the possibility that Telefonica need to adjust yours if aground selling O2. For all this we always defend the importance of diversify by sector and region also when investing for dividends.