Dividend of the week - Deutsche Boerse

DividendMax Ltd.

Dividend of the week - Deutsche Boerse

This week we are going to use DividendMax to look at an Index. The German dividend season is fast approaching so we are going to look at the DAX 30 index. German companies only pay once a year so the opportunity to pick up a couple of annual dividends over say a 14 month timescale may prove interesting. The whole of the DAX goes ex-dividend in April and May and they have all declared.

There are lots of well known companies in the DAX, so investors might want to consider the household names such as Adidas and BMW. As always check with your broker the tax status with any foreign investment. Also, beware that German companies do tend to consider the dividend as somewhat disposable and they certainly would not let it get in the way of what they perceive as essential investment. The first thing to say is that the whole of the DAX has declared so we will not see any cuts for 12 months at least.

So we go into the DividendMax Optimizer and select the DAX 30 from the Index dropdown. To illustrate what I was referring to regarding the dividend history if we select a CADI (consecutive annual dividend increases) of greater than 5 only three companies meet this critieria. (Linde, Fresenius SE and Fresenius Medical care AG). This compares with 52 companies in the FTSE 100 with a CADI >5.

It is noticable that the top of the Optimizer in German stocks, unlike the UK is dominated by the utility companies. I was speaking to a very experienced investor last night who told me that this was because many were expected to cut their dividend to  pay for the nuclear levy. This takes out two of the top three yielders in RWE and EON. It should be noted that they both recently maintained their dividends at last years level.

The default setting in the optimizer is 3 dividends but because German companies only pay once a year, I think we are better off looking at the two dividend tab to illustrate the kind of yields available over a 13/14 month timeframe. I have set the minimum yield at 5% and this leaves us with 11 stocks. Deutsche Telekom, RWE, EON, Daimler, Munich Re, Deutsche Boerse, Allianz, Deutsche Post, K&S AG, BASF and BMW. Deutsche Telekom is yielding over 14% over the time horizon to end May 2014 paying 1 definite dividend of 70 cents and another expected to be 70 cents so 1 euro 40 cents against a euro 8.25 share price. However, the dividend cover is under 1 and we are going to use cover as our next filter. Selecting a dividend cover greater than 2 reduces the list to seven stocks. There are some seriously large companies in the list with BMW, BASF, Allianz and Daimler all over euro 40 billion.

However, I was speaking to someone the other day who has invested in this company and I am going to make it our dividend of the week. His logic was that with increased regulation in the securities industry and with more and more financial derivatives being moved to trade on exchanges they would benefit greatly. They are yielding around about 8.33% if you hold them until around the middle of May 2014 to pick up two dividends of just over two euros per share each time. There was also some takeover talk recently suggesting that they may be part of the continuing global consolidation of the securities industry. CME (Chicago Mercantile Exchange) was mentioned as a potential suitor. My Dividend of the week is Deutsche Boerse.

Companies mentioned

This article was originally acceessible only to DividendMax members and is now publicly available.