Last week, the European Central Bank (ECB) made a further cut in interest rates (deposit facility rates) and this Wednesday the US Federal Reserve (Fed) made the first reduction in over four years and it also did things in a big way. The American organisation made a cut giantin which it lowered interest rates by 50 basis points. With the Fed joining the ECB, the cycle of rate cuts begins that will continue until next year and that, according to the market, will leave rates in the eurozone at 2% and 3.5% in the United States in 2025.
This week, the traditional Bank of America (Bofa) manager survey was released and, with this more accommodative scenario, managers have chosen to enter sectors that benefit from lower rates and have a higher impact. bond agent. In fact, his Dividend preference highest since 2013. High dividends are generally an alternative to bonds for collecting passive income, which explains the strong entry of managers in September into sectors that historically offer attractive remuneration for their shareholders. Thus, a perfect combination has been created: companies with high dividends that benefit from the reduction cycle. This translates into a rotation of investments towards sectors such as utilities or real estateamong others. These companies are linked to this proxy character by offering stable and growing dividends (unlike companies that depend more on the cycle), while the profitability of bonds decreases in this new environment.
In this sense, Javier Díaz, from Renta 4, explains that SOCIMI will be one of those sectors that will begin to benefit from this new scenario: “Without a doubt, SOCIMIS/REITS (real estate companies) act as a clear player bond agentgiven the sensitivity to interest rates due to traditional financial leverage and the predictability of its income and cash flows. Likewise, they always offer attractive dividend yields (remember that there is a legal imperative for a minimum dividend distribution in this type of company). ” Also from IG, Sergio Ávila is committed to public services, since “. “These companies, highly indebted, take advantage of lower financing costs to improve their profitability and maintain generous dividends, which attracts investors looking for stable income.” Ávila also adds telecommunications and infrastructure companies to this list.since these “tend to generate predictable cash flows and benefit from lower borrowing costs, thus allowing them to maintain or even increase their dividends.”
In this scenario of falling rates and, following the logical path, the profitability of Treasury bonds continues to fall and at the beginning of September it was below 3% on the secondary market (where the securities are exchanged after being issued at auctions, and to which the individual also has access) and Performance will soon double, or even 2%. In this context, and among these sectors bond agent that managers choose, among elEconomista.es was done a selection of large European companies with dividends above the Letters and which have an expert buy recommendation. For the selection, it was also applied that the companies were among the most capitalized in each of their sectors. In this fifteen selected dividends, all the companies offer remunerations that exceed 3% profitability.
Among these companies, one stands out in particular: Engie (one of the companies present in Tressis Eco30 Walletthe investment fund advised by elEconomista.es). French public service dividend exceeds 8.5% of profitability attributed to the expected profits for 2024. This already means almost tripling, thanks to the dividend alone, the profitability offered by a Letter. The consensus of analysts collected by FactSet foresees a dividend of 1.37 euros per share. This amount already represents a slight normalization of the high dividends distributed in 2022 and 2023 (respectively 1.40 and 1.43 euros), which exceeded the euro for the first time since 2016. For the next few years, the dividend policy will continue to decrease slightly. even if its dividend yield will remain above 7%.
The electricity company also has a policy of distributing a loyalty bonus, i.e. an additional payment of 10% of the dividend distributed during the year to reward the loyalty of its investors. Thus, shareholders who hold the company’s shares for two consecutive years will be able to receive an increase of 0.13 euros per share in 2024.
To this performance we must also add the revaluation that its shares accumulate in 2024, of 3%. With a buy recommendation from the experts, its price has a potential increase of 17% in the coming months.
In the telecommunications sector, the Norwegian Telenor proposes next dividend with most attractive yield of almost 7% in 2024with an estimated payment of 0.798 euros per share. Unlike Engie, analysts’ forecasts are based on a growing dividend for the coming years, which will be higher than 0.80 euros in 2026 and which, based on current prices, will provide an income to the company’s shareholders. teleco up to 7.1%. On the Norwegian stock exchange, its price has increased by just over 12% over the year and, with the advice to buy its shares, it still shows an increase of 6% for experts.
Another one closes this top 3 highest corporate dividends bond agent from Europe: Orange. The operator orange will distribute 0.74 euros per share from 2024, a payment that currently rents 6.8%. For the following years, estimates indicate that the dividend will reach 0.77 euros in 2025 (7.1%) and 0.80 euros in 2026 (7.3%). With a buy recommendation and an annual increase of 5%, Orange (now MásOrange, after the merger with MásMóvil) has a stock market growth potential of 17%.
The dividend of Enel (another of the companies of Tressis Eco30 Wallet) also exceeds 6% profitability, i.e.doubles the profitability of Letters. Its dividend will increase from the expected 0.45 euros based on 2024 profits to just over 0.48 euros per share in 2026 (profitability of 6.8%), which represents an increase of almost 7% in three years. Thanks to the revaluation of the shares and after having recorded this 5% gain over the year, investors can still opt for an additional revaluation of 9%.
With dividends above 5%, the telecommunications company BT and the real estate company Gecina. The remuneration of the two companies will be 5.7% in 2026, but BT stands out with its potential of 35%, compared to 8% for the French company.
Companies such as Veolia (electricity sector) also stand out above 4% profitability, with a yield of 4.6% in 2024 that will reach 5.5% in 2026; Eiffage (construction company and Eco30 company) with a dividend of 4.5% that will also exceed the 5% mark in 2026 and Vinci, another construction company, with a dividend of 4.3% that will be 5.1% in 2025.
The Spanish on the list
Only two Spanish companies appear on this list of European companies: Iberdrola and Merlin Properties.
THE utilities the largest of the Spanish stock market offerings a remuneration to its investors of 4.4% profitability in 2024 (this year, experts expect extraordinary profits from the sale of Mexican assets, of more than 6 billion euros). The estimated dividend is 0.59 euros per share, which will increase to 0.64 euros by 2026, with a yield of 4.7%.
The company chaired by Ignacio Galán is achieving this performance even though its price is at historical highs (currently set at 13.71 euros) and, although current valuations do not indicate that the electricity company has more potential on the stock market, Experts recommend buying its shares againDuring the year, the company recorded increases of almost 15% in the Spanish market, which would be its most bullish year since 2020.
Up to 3.8% profitability ensures Socimi’s dividend and estimates indicate that the remuneration will continue to increase in the coming years. Based on what is expected for 2024, Merlin would distribute a payment of 0.43 euros for each share held in the portfolio. An amount that will rise to 0.45 euros in 2025 and to just over 0.46 in 2026. The forecasts are even longer term and indicate a dividend of 0.52 euros in 2027. For the moment, these payments offer 4% higher yields.
And what’s more, Merlin Properties manages to offer these returns to its shareholders even though its shares are getting closer and closer to the level of 12 euros, at which they have not been listed since February 2020, in the midst of the pandemic. In fact, real estate is already less than 14% of pre-Covid levels. Although there is still a long way to go, the truth is that analysts expect its shares to travel exactly this path in the coming months. They also give the company the best recommendation to buy its shares from April 2022.
