AllianzGI expects European stocks to pay out dividends totalling EUR 323bn in 2018.

Thursday 11 January 2018. Dividends are an important source of returns and are continuing to help investors to smooth out the volatility of equity returns, according to new analysis by Allianz Global Investors, one of the world’s leading active investment managers.

Europe particularly attractive

Jörg de Vries-Hippen, CIO Equity Europe at Allianz Global Investors, expects European dividend payments¹ to total a record EUR 323 billion in 2018, around EUR 23 billion or 7.7 per cent more than last year. He believes dividends are just one reason that European equities are particularly attractive:

“We haven’t had such an optimistic outlook as we do going into 2018 for quite some time. The economy in Europe is running well and corporate profits are expected to continue to develop positively, which has a positive impact on companies' dividend payments and pay-out ratios. Overall, we expect earnings growth of around 8 per cent, perhaps a little lower if the euro strength persists.

“Last year, 80 percent of profits were distributed as dividends - more than ever before. This means, companies are no longer willing to grow at any price. More attention is being paid to the interests of shareholders in the use of corporate profits...“

Where to expect highest dividend yields in Europe?

In Europe in 2017, the average dividend yield was highest in Portugal at 4.47%, followed by Spain (4.07%) and Finland (4.02%). The UK, traditionally the most important market for dividend hunters in terms of volume, comes in fourth with 3.98%. In Germany, a dividend yield of 2.51% on average was paid in 2017.

"These averages are an important benchmark and reveal a lot about the valuation of each market. For me, decisive factors are the individual amount of the dividend and how a company can translate expected cash flows into a sustainable dividend policy. Companies that meet our quality standards in both these aspects can be found in almost all European stock markets. In particular, at the moment, oil, telecoms and insurance stocks are attractive from a dividend perspective," says Jörg de Vries-Hippen, who manages the Allianz European Equity Dividend, a fund that focuses on companies with high dividend yields.

1. Portugal 4.47%
2. Spain 4.07%
3. Finland 4.02%
4. UK 3.98%
5. Norway 3.95%
6. Belgium 3.45%
7. Sweden 3.34%
8. Italy 3.34%
9. Switzerland 3.07%
10. France 3.04%
11. Germany 2.51%
12. Netherlands 2.47%
13. Austria 2.22%
14. Denmark 2.09%
15. Ireland 1.47%

While the average annual share price performance for a five-year holding period may be negative, dividend payments regularly contribute positively to the performance of equities. Over the long term, dividend payments account for about a third of total returns according to AllianzGI experts. The contribution of dividends to total annualized performance is highest in Europe, at 38.2%, followed by North America (31.0%) and Asia Pacific (excluding Japan) at 28.9%.³

"For years now, the dividend yield in Europe has been more than two percentage points above the yield of 10-year Bunds," says Jörg de Vries-Hippen, Head of Global Capital Markets Analysis and Thematic Research.

¹ MSCI Europe
² Source: Bloomberg for respective MSCI country index, data as of 30 Nov. 2017
³ Data as of 11 Dec. 2017 for MSCI Europe, MSCI North America and MSCI Pacific  from 1972 to end  2017.

Note to the editor:

The publication “Capital Income: Dividends” can be accessed here.

Further information

Nadia Hassini +44 (0)20 3246 7558
Sarah Einig +44 (0)20 3246 7846
Alastair Fairbrother +44 (0)20 3246 7432

ukmedia@allianzgi.com

About Allianz Global Investors
Allianz Global Investors is a diversified active investment manager with a strong parent company and a culture of risk management. With 25 offices worldwide, we provide global investment and research capabilities with consultative local delivery. We have more than EUR 481 billion in AUM for individuals, families and institutions worldwide and employ over 500 investment professionals.

At Allianz Global Investors, we follow a two-word philosophy: Understand. Act. It describes how we look at the world and how we behave. We aim to stand out as the investment partner our clients trust by listening closely to understand their challenges, then acting decisively to provide them with solutions that meet their needs.

Disclaimer
Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested. This is a marketing communication issued by Allianz Global Investors GmbH, www.allianzgi.com, an investment company with limited liability, incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42-44, 60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (www.bafin.de). Allianz Global Investors GmbH has established branches in the United Kingdom (Allianz Global Investors GmbH, UK branch, 199 Bishopsgate, London, EC2M 3TY, www.allianzglobalinvestors.co.uk; subject to limited regulation by the Financial Conduct Authority, www.fca.org.uk), France (Allianz Global Investors GmbH, France branch, www.allianzgi.fr; subject to limited regulation by Autorité des Marchés Financiers, www.amf-france.org)., Italy (Allianz Global Investors GmbH, Italy branch, via Durini 1, 20122 Milan; subject to regulation by the competent Italian Authorities in accordance with the national legislation), Spain (Allianz Global Investors GmbH, Spain branch; subject to limited regulation by Comisión Nacional del Mercado de Valores, www.cnmv.es), Luxembourg (Allianz Global Investors GmbH Luxembourg Branch; subject to limited regulation by Commission de Surveillance du Secteur Financier, www.cssf.lu) and the Netherlands (Allianz Global Investors GmbH-Netherlands Branch; subject to limited regulation by Autoriteit Financiële Markten www.afm.nl). Details about the extent of the local regulation are available from us on request.