Research Finds Dividends Could Cushion Blows From An Uncertain 2019

The 2019 outlook remains uncertain due to the current political backdrop with Brexit and a number of key national elections looming. 

Furthermore, government bond yields in many countries are hovering in negative territory and are therefore at an "insufficient level to preserve capital".

As a result, investors are more reliant on dividend payouts and according to AllianzGI's Dividend Report 2019, these "look set to remain an important anchor for investors [this year]".

The study found European companies are looking the most attractive, having contributed to around 41% of total returns on European equities since 1973.

It also predicts payouts of approximately €350bn from MSCI Europe companies this year, meaning another year of record amounts paid to shareholders (up by around €16bn - or 4.8% - on last year's figure).

At the end of 2018, in the 45 years from 1973, the dividend yield on European companies averaged around 3.8% across the market in comparison to 3.2% in North America and 2% in Asia Pacific. In 2018, the European Monetary Union average dividend yield was 3.25% with the UK coming in at 4.97%.

Yield hunters stuck on UK despite more income to be found overseas

However, the report emphasised dividends alone cannot ensure more stability with equity investments. 

It said: "High-dividend equities in themselves seem to have a less volatile performance than those of companies with lower dividend payouts.

"This is demonstrated by analysing the past performance of US stocks, for which the longest time series are available. This analysis shows that the volatility of US equities (measured in terms of a 36-month rolling standard deviation as a gauge of price fluctuation) has been lower since 1975 among companies paying out a dividend than among stock corporations that did not distribute any profits.

"Analogous behaviour is also discernible for European dividend stocks since the 1990s."

Jörg de Vries-Hippen, CIO equity Europe at AllianzGI, added: "For us, continuity in dividend payments is just as important as their relative level, because a positive combination indicates a healthy basis. Such companies often prove to be stable anchors in turbulent times."