What to look for in dividend-paying stocks

Frankfurt / Main (dpa / tmn) – Dividends are distributions from stock companies to investors. They can act as a buffer against the risk of loss during difficult times. However, investors should not only pay attention to the amount of the payout.

On the contrary, they should also take a closer look at the economic situation of the SOE. The fund company’s “Financial Literacy for All” campaign draws attention to this point.

Important questions about this: Where does the dividend come from – and how reliably has the company paid it in the past?

According to the Fund Association, listed shares of European companies currently have an average dividend yield of 3.7% (at the end of August). For comparison: The yield on ten-year federal bonds is currently negative – according to Stiftung Warentest, it is minus 0.56% per annum (as of September 12, 2019). According to the Fund Association, the yield spread between government bonds and dividend-paying stocks has never been greater.

When building up their wealth, investors should always weigh the risk and the potential return. The advantage of government bonds: If investors hold them to maturity, they take no price risk, according to Stiftung Warentest. In the case of federal securities, the risk of the issuer – that an issuer will become insolvent – is very low.

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