Germany’s blue-chips are about to start paying their annual dividends, says the Frankfurter Allgemeine Zeitung. And there’s a record sum in the kitty: according to estimates from Commerzbank, some €38bn will be handed out for 2018, 3% more than in the previous year. The higher dividends are excellent news, as reinvested income is crucial to healthy long-term returns.
The chart shows the blue-chip DAX-30 index (a total-return index, so it includes reinvested income) and the Dax price index, which only reflects price movements. The cumulative impact of reinvesting dividends since the turn of the century is huge. Investors who did so would have gained around 60% by now; those who didn’t are marginally in the red.
“We are now into month 115 of this economic expansion, about double the post-World War II norm and just five months shy of matching the record-long cycle of the 1990s. Just as was the case back then, hubris has set in, as the consensus believes that the business cycle has somehow been repealed and a recession is a 2020, 2021 or even a 2022 story. I somehow doubt it. A few salient points. A recession is not the end of the world. It is merely part and parcel of the cycle. There is no sense denying their existence or even their inevitability, since we know for a fact that there have been ten recessions in the post-World War II era. Each one the consensus — and the US Federal Reserve, the central bank – completely missed. Now is no different. History repeats… the reality is that we have been in recessions and bear markets roughly 15% of the time in the past seven decades.”
David Rosenberg, Gluskin Sheff