Dividends are one of the ways that companies distribute profits among their shareholders. The distribution can be made in cash, shares, or share subscription rights (scrip dividend). The distribution can be made in cash, shares, or share subscription rights (scrip dividend). Listed companies usually distribute dividends once a year. Each shareholder receives a share proportional to his or her stake in the company.

Companies with the highest dividend yield

If you are looking for the best options, at Finect we bring you the ranking of the companies that offer the most attractive dividend yield.

Of course, it is convenient not to be carried away only by the percentages and to pursue companies with a tradition in the financial markets and with solid balance sheets so as not to incur risks. If we do not know what strategy to carry out, it is best to ask for help from a financial advisor.

When investing in companies that distribute dividends, experts agree that it is not always necessary to get carried away by those companies with the highest returns, but that other factors must also be taken into account:

Diversify the portfolio.

As is often said in the world of investment, it is convenient not to put all your eggs in one basket. And it is that companies, even if they have a generous dividend distribution policy, are not free of the risks that exist in the economy.

For this reason, Aberdeen Asset Management explains in their practical guide on diversification that when looking at assets, it will always be necessary to select those “whose returns respond to largely independent factors, since the returns of shares are closely related to the economic cycle. Therefore, effective diversification will require assets whose returns are not affected by this cycle.”

Analyze the balance sheet of the company.

If our strategy is aimed at maintaining and making long-term assets profitable while obtaining regular income, it will not be enough to look at the percentage of dividend yield; the company’s balance sheet must also be taken into account. And it is that on many occasions we can find companies with high payouts but weak balance sheets.

In this sense, it will be convenient to analyze especially the levels of debt and liquidity that the company presents, since they will have to be sufficient for the company to continue remunerating its shareholders even if there are ups and downs in the economy and these affect its benefits.

The dividend is not guaranteed.

Although there are many investors who seek to “live off the income” through dividends, it must be taken into account that when choosing companies, their payment is not guaranteed since the shares do not pay interest, as they can pay a bonus or a deposit. This implies that companies can reduce the coupon payment or vary the dates they had scheduled at times when, for example, they do not register the expected benefits.

Analyze aristocrat indices

Although in the world of investment, past returns do not guarantee future ones, you can always go to reference indices to assess the behavior of companies. Standard & Poor’s launched the S&P 500 Dividend Aristocrat in 2015, an index made up of 53 companies that have increased their dividend continuously over the last 25 years.

Although not all of them offer shareholders high dividend yields, they do provide, at the very least, peace of mind for their investors. Some of the best known are Coca-Cola and McDonald’s. We also have this index at a European level, the S&P Europe 350 Dividend Aristocrat Index, which also includes companies whose shareholder distribution has also increased in the last 10 yearse also have this index at a European level, the S&P Europe 350 Dividend Aristocrat Index, which also includes companies whose shareholder distribution has also increased in the last 10 years. Enagás, Danone, or Red Eléctrica are some of them.

Invest through funds or ETFs.

If you wish to invest in dividend-paying securities without risk, consider all these aspects.
If you don’t know enough to bet on dividends, you can either work with a financial advisor to create an investment strategy or wager directly on shares or funds that perform well over time.
and pay dividends

You can also use a dividend distribution investment fund, which gives you access to a more diversified portfolio. Here you can see our showcase of products for investing in dividends.