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Dividends make up 40% equity returns
11 March 2014
A new study shows that dividends often yield higher than bonds
Dividends have accounted for 40% of overall returns in
European equities during the past 40 years, according to a new
study by Allianz Global Investors.
The research revealed that dividends often yield higher than
10-year sovereign bonds. For more than two years investors have
received a substantially higher dividend yield for holding
European equities than for bonds, said the firm.
The study also showed a difference between Europe and the US.
European companies tend to pay "particularly generous"
dividends compared to their peers in the US.
"A focus on sustainable dividend payments has become a clear
pattern on the CEO agenda of listed companies in Europe and it
looks like the dividend theme is here to stay as it is a
convincing way of gaining shareholder trust.
"This policy does require a lot of discipline, but the good
news for investors is that you’d be hard pushed to
find a better proxy for the robustness of a
company’s earnings expectations than its dividend
policy," said Joerg de Vries-Hippen, CIO of European
Dennis Nacken, author of the study, said there is further scope
for dividend hikes, but warned that focusing solely on
high-dividend payments is misleading.
"It is the business model of a company, above all, that should
shape expectations for sustainable earnings, in addition to a
shareholder-friendly corporate policy," he said.