Dividends: Investors collect seven percent

Beat inflation with dividends? Sounds like a dreamy idea. While prices rose by more than seven percent last year, seven percent returns should also be possible with some dividends in the Dax. For four of the forty Dax companies, the dividend this year should ultimately account for around seven percent of the current share price. If investors believe the analysts’ forecasts, the real estate group Vonovia should achieve a dividend yield of around 7 percent, the chemical giant BASF 7.1 percent, the car company BMW 7.6 percent and Mercedes-Benz as much as 7.8 percent.

However, dividend yield as a metric is a popular trap for investors. An attractive dividend yield is not always proof that a company has significantly increased its dividends. In this way, the dividend can appear lavish in relation to the stock market price even if the company’s share price has fallen enormously.

The best example: the real estate giant Vonovia has a dividend yield of more than seven percent, but in the past twelve months alone the price has fallen by around 50 percent. The lesson for investors: “It is therefore crucial not only to consider the dividend yield,” says stock market expert Stephan Witt from the Finum investment consultancy, “but also the future viability and sustainability of the business model.” In the case of high dividend yields, investors should always follow the course of the price of previous months and previous years.