The Best German Dividend Stocks

Last Updated on June 11, 2021 by Oddmund Groette

Germany is home to many high-quality companies. Who has not heard of Adidas, Puma, Porsche, BMW, BASF, Siemens, or for example SAP? Germany is famous for its “mittelstand”, small and medium-sized companies with turnover up to 500 million EUR, but many family-controlled companies are public. Moreover, Germany is a safe place to invest, both legally and financially. Germans are conservative and use debt and leverage with caution.

The US market is by far the world’s biggest, both in terms of market capitalization and the number of listings, but Germany, as the ninth biggest stock market by market cap, offers many opportunities. In this article, we take a look at the best dividend payers.

The German Stock Market:

We assume most investors have heard about the DAX. This is an index compromising of the 30 biggest and most liquid German companies. The 30 stocks are liquid and heavily traded, and the DAX-futures is one of the most used trading vehicles on the planet.

However, what might not be so well known is the high number of listed stocks, albeit the market is a bit fragmented. Frankfurt Stock Exchange, Deutsche Börse, has currently 310 companies in “prime standard” and 140 companies in “general standard”. Additionally, there exist several hundred other stocks on other exchanges.

German withholding taxes

If you’re a dividend investor you need to check out the withholding taxes. Most countries (except the UK, Singapore and Hong Kong) have withholding taxes. This is a tax that is “withheld” by your broker and later transferred to the local IRS. The standard rate is normally between 15 to 35%. In effect, this is double taxation of the same income as the company’s profits have already been taxed.

In Germany, the withholding tax is 26.375%. Thus, if your dividend is 100 EUR, you get paid 75 EUR. A tax treaty between your country of residence and Germany might lower it to 15%, or you might get it all back later by filling out paper forms.

Taxes are one of the two downsides of dividend investing. The other downside is the drag on reinvesting the dividend above book value, unless you consume the dividend, of course. To get a better understanding of dividend investing we suggest you read all our articles about dividend investing (to make sure you understand the pros and cons):

German dividend frequency:

Most German companies pay an annual dividend, not quarterly as many US companies. Most dividends are paid out in April and May when the annual shareholder meetings are taking place.

The German dividend culture:

Compared to the Anglo-Saxon culture (the US and the UK), there is much less interest and culture for stock investing (in general). However, the FIRE movement is gaining momentum. Coupled with the ZIRP (zero interest rate policies) which makes bonds not very useful for retirement income, the interest for dividend-investing has picked up steam.

How do you buy German stocks?

Many stocks trade as ADRs on the NYSE and NASDAQ, and many more trade as “unofficial” ADRs on the OTC market. Most brokers have access to the US markets, and this is perhaps the easiest “shortcut” to get access to the German market.

Most of the biggest international brokers offer access to German stocks, for example Interactive Brokers.

The best ETFs for German Dividend Stocks

Instead of buying individual stocks you might want to invest in ETFs instead. This gives you broad diversification and you are less likely to pick the wrong stocks, which many small private investors do. The two biggest ETFs available for Europeans are:

  • iShares DivDAX UCITS ETF (DE) (ISIN DE0002635273, WKN 263527)
  • Deka DAXplus Maximum Dividend UCITS ETF (ISIN DE000ETFL235, WKN ETFL23)

These two make distributions up to four times per year.

For American-based investors, the ETF with the ticker code EWG is a viable option. EWG invests in large and medium-sized businesses in Germany and pays a dividend once or twice per year.

The dividend yield on the DAX-30:

Let’s start with the current dividend yield on the DAX 30:

Dividend Yield per Jan 2021
Adidas 0 0
Allianz 9.6 4.8
BASF 3.3 5.1
Bayer 2.8 5.8
Beiersdorf 0.7 0.75
BMW 2.5 3.45
Continental 3 2.5
Covestro 1.2 2.4
Daimler 0.9 1.5
Delivery Hero 0 0
Deutsche Bank 0 0
Deutshe Boerse 2.9 2.1
Deutsche Post 1.15 2.8
Deutsche Telekom 0.6 4
Deutsche Wohnen 0.9 2.1
EON 0.46 5.1
Fresenius 1.2 1.8
Fresenius SE 0.84 2.2
Heidelberg Cement 0.6 1
Henkel 1.85 2
Infineon 0.27 0.9
Linde 3.55 1.7
Merck 1.3 0.9
MTU 0.04 0.02
Munich Re 9.8 4.1
RWE 0.8 2.3
SAP 1.58 1.5
Siemens 3.9 3.3
Volkswagen 4.86 3.2
Vonovia 1.57 2.6

German dividend aristocrats:

The US dividend aristocrats are companies that have increased their dividend annually for 25 consecutive years. Unfortunately, such a list doesn’t exist in Germany, there simply is no stock that has managed 25 years of dividend rises. Nevertheless, there are many solid dividend payers, the best might be Munich Re:

Munich Re:

We would like to mention Munich Re separately. The reason is simple: This stock has the longest and most stable distribution history. The company is the world’s biggest reinsurer and Berkshire Hathaway was a shareholder for many years until they decided to sell in 2015. Munich Re has been in existence since 1890 and is well capitalized.

Munich Re has never lowered its dividend since 1969. They have not always increased, though. The dividend per share looks like this (in EUR):

Munich Re has a long dividend history and has never lowered the dividend since 1969.

The 9.8 EUR dividend for 2019 equals a 4.1% dividend yield. Munich Re only trades at a P/E of 12 based on the 2019 results and thus the payout ratio is still pretty low: It’s been fluctuating between 40-60% of earnings. The earnings for 2019 were 19 EUR.

The German dividend list:

The user nicknamed Rickrack on Seeking Alpha has been so kind as to devote his time to sort out a detailed German dividend list. We recommend following Rickrack to keep up to date with German dividend stocks.

The list below contains the stocks that have not reduced their dividend for at least ten years. They might have kept it equal, but never lowered it:

Adesso
Airbus
All for one Group
Allianz
BASF
Bayer
Baywa
Bechtle
Beriersdorf
Brenntag
Cancom
Cewe
Compugroup Medical
Deutsche Post
DIC Asset
Dr. Hönle
Eurokai
Evonik
Fresenius
Fresenius Medical Care
Frosta
Fuchs Petrolub
Gea Group
Gerresheimer
GFT Tech
Grenke
Hamborner REIT
Henkel
Hornbach
Infineon
Isra Vision
KPS
Lechwerke
MBB Industries
Mensh und Maschine
Merck
MTU
Munich Re
MVV
Nemetscheck
Paul Hartmann
SAP
Siemens
Software AG
Steico
Sto SE
Stratec Biomedical
Symrise
Umweltbank
USU Software
VIB Vermögen
Villeroy & Boch
VTG

The majority of the stocks can be purchased on the US OTC-list.

Compared to 2019 the list above has one stock less. These stocks below were added to the list, according to Rickrack:

  • Airbus
  • All for One Group
  • BASF
  • Brenntag
  • Dr. Hoenle
  • GEA Group
  • Gerresheimer
  • Infineo
  • KPS
  • Mensch und Maschine
  • Villeroy & Boch

These stocks were kicked out from the list (reduced or eliminated the dividend):

  • Axel Springer
  • CTS Eventim
  • Dt. Euroshop
  • Edding
  • Fielmann
  • Fraport
  • Freenet
  • HeidelbergCement
  • OHB
  • Rational
  • Sartorius
  • Syzygy

German stocks that have increased the dividend ten years or more in a row:

Rickrack has made this list of German stocks that have raised the dividend at least ten years in a row:

Airbus
BASF
Bechtle
Brenntag
CEWE
Fresenius
Fresenius Medical Care
Fuchs Petrolub
Gerresheimer
Isra Vision
MBB Industries
SAP
Stratec Biomedical
Symrise
VIB Vermögen
VTG

German payout ratios:

In the stock market, we need to be careful about making generalizations. For example, in the US research indicates quintiles 1 (low yielders) and 5 (high yielders) have underperformed quintiles 2-4. However, in a research report by Credit Suisse they conclude high payout ratios are the best dividend-stocks in Hong Kong, Switzerland, and Germany. The results are later confirmed by Societe Generale in a paper called Equity Income Investing Is Not All About A High Dividend Yield.

Conclusion:

The case for international diversification has been proved many decades ago. The aim of this list is to give you some ideas for further research. To start researching dividend-stocks might be the best place to start. After all, the reason why companies are able to pay a dividend is because of their earnings.

 

Disclosure: We are not financial advisors. Please do your own due diligence and investment research or consult a financial professional. All articles are our opinion – they are not suggestions to buy or sell any securities. 

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