Dividends from the Spanish Stock Market as an Investment Option

One of the strategies that the most defensive investors start from is through companies listed on Spanish equities that grant their shareholders the distribution of a remuneration for their profits. They are known as dividends, and that They are constituted as a way of obtaining a fixed income within the variable. It's that simple, but at the same time as complicated as you are going to check if this is your profile as an investor.

A good part of the national companies that are listed on the national continuous market are in charge of distributing dividends among all the savers who have taken positions in their shares. They present very heterogeneous annual yields, since They range from a meager 1%, to the most generous that raise their margins almost to 8%. With a whole group of companies that are in charge of distributing this remuneration among the investors who have bought their shares.

But now, is it advisable to buy a listed security for the mere fact that it distributes dividends among its shareholders? The answer will depend on the profile of the investor you have. Not surprisingly, the most conservative are the most likely to use this strategy in their investment. Even can help protect you from future losses. This is so, because in the meantime you are receiving a return on your savings of around 5% every year. And that in any case, it can offset (or amortize) the capital gains generated since the formalization of the operation.

Another relevant aspect that you should take into account is that the dividend they give you is deducted directly from the share price. It is not a gift at all. Although it normally recovers it after a few trading sessions, although this process is not guaranteed in the financial markets. In any case, what will generate you is that you have more liquidity in your checking account, which is where these payments granted by companies listed in equities will go. And even reinvest it, if this is your wish.

Characteristics of the companies that distribute dividends

Not all of them make this distribution of their profits, but only those that are corporately consolidated, and have a more decisive role in the national stock index. It will be convenient for you to know them, in case your strategy to make the savings profitable goes through this model. And that unlike other companies, they contemplate a series of qualities that are always present, and that make them highly visible to buyers.

• They are large-cap companies, and that they have a very notable specific weight in the Spanish stock market. Many securities are exchanged in the same trading session, and in any case above the other securities.
• They come from almost all stock market sectors, practically without exclusion: banks, insurers, construction companies, telecoms, energy companies, consumer goods, etc.
• They have very stable business models, which have been successfully developed in the markets for many years, and therefore have trusted by all investors, both institutional and retail.
• The periodicity of dividends is not uniform, since they are developed with great plurality: annual, semi-annual or quarterly, depending on their remuneration policy, and which can be chosen by savers based on this contribution.
• All the blue chips on the Spanish stock market, that is, the most representative, make these payments effective, without exclusion, with the only difference of its amount.
• The companies that make these payments on account They are usually the object of the attention of large investment fund managers, which usually include them in their model portfolios.
• They are values ​​very prone to attract the money of small and medium investors looking for a guaranteed reward for your savings, and usually on a regular basis.
• Your quotes they move under greater stability in their prices than other securities, and without showing much volatility in them. Not being very suitable for speculators.

Small Investor Strategies

With this class of companies, retailers usually have several strategies to channel the return on their assets. They are not always the same, and it will depend a lot on your conditions as an investor. One of the most widespread is based on taking positions (buying) in these companies in the weeks prior to the distribution of this remuneration.

First, they assure you that you will receive a dividend, and on the other, you will take advantage of the greater stability in the quotation of their prices. This is because purchases are frequently imposed on sales in the weeks before they are awarded.

Another strategy used by savers consists of to create a savings fund for the next few years, regardless of what their contributions indicate. In this way, they secure a small capital every year. And that given the current conditions of the main banking products (deposit, promissory notes, bonds, etc.), it constitutes the most important source of profitability they have at the moment.

Fixed income products, and as a consequence of the cheaper money by the European Central Bank (ECB), are no longer so profitable. Not in vain, its performance is going through one of the worst moments in recent years, below the 1% barrier. While through dividends an interest of 5% can easily be obtained.

Faced with this scenario that is presented, there are many traditional investors who, being invested in banking products destined for savings, have turned their interest towards the companies that develop these payments. And that you can even make operations profitable through its listing in the financial markets, as long as its evolution accompanies you.

How much do these companies distribute?

The year that has just started comes with bread under the arm for shareholders, as companies have increased their shareholders' pay by almost 2%. What's more, Several members of the Ibex-35 will offer a dividend yield of more than 5% over the next twelve months: Enagás, Telefónica, Iberdrola, Red Eléctrica, EBME and Repsol, among the most important.

The electricity sector will continue to be one of the most generous with shareholders in 2016. To the detriment of the banking sector, which has seen this remuneration decrease in recent years, as a result of the adjustments they have had to undertake to clean up their income statement .

If your intention is to opt for this investment model, offers will not be lacking in the coming months, for sure. Its calendar is full of proposals with these characteristics, and that will move with minimum returns from 1%, and with a maximum objective of up to 8%. Even You do not have to limit yourself to national companies, but you can go outside our borders to find opportunities in this group of stocks, with equally generous returns, especially those from old continent equities.

However, if you wish to opt for an investment strategy in which dividends are present, you must always bear in mind the new taxation that has been applied in Spain since 2015. And which is certainly not very favorable for your interests, as the exemption of the first 1.500 euros collected in dividend has been eliminated.

This in practice will mean that in your next Income Statement you have to pay from the first euro that you enter for this concept. From this perspective, you should assess whether you are interested in hiring them or not, and whose decision will depend on other variables that you enter in the tax document: deductions, income generated, equity, etc.

Some tips to assess your hiring

The final decision on whether you should subscribe to this kind of securities will correspond exclusively to you, to no one else. First, you must diagnose your profile as a saver, the look you want to give to your investments, and very especially the term you are targeting: low, medium or high. And based on these variables, decide on the best investment model. And it may be this. Although always keeping in mind the following considerations

1. If you are an investor with very short terms of permanence, it will be better to give up these operations, since to be profitable you will have to have them in your portfolio for several years.
2. If you verify, once the dividend has been distributed, that the shares return to their old prices, it may be time for you to close the positions, taking the dividend earnings to your checking account.
3. Through this very special strategy you can make a fixed income every year, that complement the ones you have regularly every month, and that can favor you even to give you a little whim.
4. If you opt for the flexible dividends that some companies contribute, you will also have the opportunity to reinvest this income in the company, through new actions. With which, the return on your investment will be higher.
5. The most speculative investors, even They can take advantage of the increases in their price in the weeks prior to the distribution of the dividend, closing their positions with capital gains, although logically without receiving this remuneration.
6. The growth expectations will go independently of the granting of this remuneration, and probably a company that does not apply this payment policy, is in a better disposition to go to higher quotas in the quotation, and therefore, more beneficial for your interests.
7. And now you only need to choose from a wide and diversified offer offered by companies that are listed on equity markets, both nationally and abroad. With proposals of all kinds, regarding their performance and the periodicity of their payments.