The stock market is composed of the assets of companies with different characteristics. There are those focused on valuation, for example, while others focus on sharing results with shareholders. In this group are the largest dividend payers.
By knowing them, you will be able to assess whether the alternative makes sense for your portfolio and your goals. In addition, it is possible to know which companies stand out in the distribution of profits if it is in your interest to invest with this focus.
In this article, you will find out which are the biggest dividend payers and how they are characterized. Keep reading!
What are dividends?
Dividends are a type of income distributed by publicly traded companies and real estate funds, traded on the stock exchange. Their main objective is to remunerate investors and share part of the profits obtained.
As for how it works, the division of dividends begins with the definition of the proportion of net income that will be distributed.
Every company listed on the Brazilian stock exchange is obliged to distribute part of the profits but is free to establish the percentage of distribution in its bylaws. In addition, the company can determine the regularity of payment, which can be monthly, quarterly, semiannually, or annually.
After determining net income, the company takes the proposed dividend payment to the Board of Directors for approval. Next, the specific dates are disclosed, focusing on the day on which the payment occurs.
The dividend distribution is then presented as a price paid for each share. Therefore, those who have a greater market share receive a greater amount related to dividends. Payment is made in cash, which guarantees liquidity to shareholders.
What types of companies pay the most dividends and why?
When looking at which are the biggest and best-paying dividends, you will notice that the companies have characteristics in common. Knowing them can help you identify good opportunities in the stock market.
Next, see which aspects to consider!
As you have seen so far, the distribution of dividends is linked to the ability of the business to generate results. Therefore, the company must have a good ability to generate cash and earn profits.
The greater the profitability of the venture, the greater the dividend offered per share. Therefore, the business must be able to generate positive results in sales but also have controlled costs so that it is possible to obtain a net profit.
Good dividend payers are also financially healthy businesses. One of the characteristics to consider in this regard is the low level of indebtedness.
For it to be possible to consolidate the performance over time, the idea is that the enterprise presents a debt commitment. In this way, a greater part of the results is free to generate dividends.
More important than generating a profit in a month or quarter is being able to maintain results over time. Therefore, the biggest payers of dividends are those companies that have constant results.
In this way, they create regularity in the payment of these earnings, which favors the investor’s return over time. On the other hand, companies that alternate periods of profit and loss are not usually among those that pay good dividends.
It is also quite common for companies that distribute good amounts of dividends to have more market maturity. This is because such a condition favors the generation of cash and profit and the achievement of consistent results.
Usually, these are businesses that have already established themselves in the niche in which they operate, having made the main investments previously. As a result, they can distribute a more significant part of the earnings in the form of earnings.
Predictability of results
The combination of the above characteristics leads to an equally necessary quality among good dividend payers: the predictability of results. In other words, the business must be able to predict, with some certainty, what resources will be obtained over time.
This is possible, primarily, due to strong cash generation and low indebtedness. In addition, the fact that it is a mature company offers more solidity of operations, which tends to favor the achievement of results.
Due to this predictability, trades tend to have low volatility and less risk. However, note that growth is also more limited, precisely because the resources that could be invested in new projects are shared with shareholders.
Therefore, it is quite common for good dividend payers to be companies that grow at a slower pace. Thus, it is up to each investor to think about their priorities: generating passive income or seeking greater appreciation in shares.
What are the sectors of the largest dividend payers on the stock market?
In addition to the features you just learned about, some sectors stand out in terms of dividend payments and direct deposits. This is because, in practice, they have a specific structure that favors the distribution of profits, rather than requiring large reinvestments.
Therefore, when investing with a focus on receiving dividends, you may want to pay attention to these segments. Check out what they are!
When checking a ranking with the biggest dividend payers of the Bovespa Index, for example, you will notice that part of them are part of the electricity sector. This is the segment that brings together companies responsible for the transmission, management, and supply of energy to properties.
The highlight in dividends happens because this is a segment whose investment is needed more initially. After building the energy parks and creating the infrastructure, you don’t need to reinvest much over time.
In addition, it is common for depreciation to have already occurred, which benefits the volume of cash. These conditions increase the condition of sharing part of the gains with investors, placing energy companies among the main ones on the stock exchange in this sense.
The financial sector, on the other hand, is composed of companies such as banks, insurance companies, securitization companies, and B3 itself, which is the Brazilian stock exchange — in addition to other businesses. In general, they are companies that concentrate a large number of resources and consistently achieve high profits.
As a result, there is strong cash generation, which enhances the distribution of profits. In addition, the financial sector tends to have very consolidated companies that do not need to make investments as often. Therefore, they can better remunerate investors.
Finally, another segment that stands out in the payment of dividends is the oil sector. It is usually less stable than the others mentioned, due to commodity trading and exposure to the international scenario.
However, as with the electricity sector, the main investments were already made and depreciated at the beginning of the business. As a consequence, there is a greater free margin of results to be distributed.
Who were the biggest dividend payers of the last decade?
In addition to knowing which are the prominent segments, it is worth knowing which companies are the biggest payers of dividends in their shares. While past results are no guarantee of future performance, it is possible to get a general idea of the highlights.
Thus, you can have information to guide your analysis and decision-making. Next, find out which are the enterprises stood out in the payment of dividends!
Why invest in companies that pay dividends?
Now that you know which companies stand out in terms of earnings, it’s worth thinking about the benefits of investing with a focus on dividends.
Next, find out what the benefits are to consider!
According to legislation valid in 2021, dividends are exempt from Income Tax for investors. This is because, in practice, the company is already taxed in relation to them, as they are recorded in the accounts as profit.
Valuation of shares
Dividend payments can also help with stock appreciation. After all, a good payment history tends to attract more investors. So, the more income you receive, the more attractive the company can be, which would increase the value of the stock.
Increase in profitability
Another aspect to consider is that receiving dividends can increase your overall profitability. This is because one of the ways to make gains when investing in stocks is to sell them for a price higher than the average purchase price.
That is, it is necessary to execute the sale to realize the profit and obtain capital. If the company does not pay dividends regularly, the principal return is conditioned on that decision. Thus, it would depend on the liquidity of the asset for sale.
However, with the receipt of dividends, it is possible to improve the level of liquidity — since the money goes to your account. As a result, the total return can become higher—especially when considering dividends and long-term appreciation.
Possibility of reinvestment
As you have seen, dividends are paid in cash to shareholders. Therefore, they can be used in the most convenient way, according to the investor’s plans and interests.
Among the alternatives is the use of the amount to acquire more shares of the same company or of other companies. You also have the chance to make other investments in fixed income or variable income.
Therefore, it is a way to increase the capacity to invest and to make frequent contributions. In the long run, this can help build wealth and achieve goals, given the potential for accumulation.
Opportunity to earn a living
Investing with a focus on dividends also has the advantage of being able to live on passive income. With a robust portfolio and good returns in this regard, you can get frequent receipts that cover your living expenses.
In this way, it is possible to achieve financial independence and have more tranquility to deal with everyday life.
How to calculate the value of dividends?
After knowing the main characteristics of dividends, it is interesting to understand how they are calculated. In the case of companies that pay dividends on their shares, it all starts with calculating net income.
It is obtained by decreasing all costs and expenses for the period in relation to gross revenue. From this, there is the application of the percentage that will be distributed to investors. Note, also, that the calculation depends on the dividend policy that is presented by the company.
This document contains the applicable percentages, payment terms, and other issues. So you can get an idea for calculating dividends. Afterward, the amount to be paid is provisioned in cash.
However, there is no need to worry about this calculation. The company announces how much it will be paid for shares when it announces its dividend schedule — with the cut-off date for acquiring shares and receiving the dividends (with date) and the payment date.
How does Dividend Yield work?
When talking about calculations, it is worth knowing a useful indicator for evaluating dividends: the dividend yield (DY). It corresponds to an indicator of fundamental analysis and serves to point out which are the biggest payers of dividends.
The DY is given by a ratio, in percentage, that considers the total dividends paid per share in the period over the current price. The equation is as follows:
Dividend yield (%) = (Total dividends paid per share at the last 12 months / Current share price) x 100
In the end, the result indicates the return on investment with dividends. Therefore, it is possible to identify how much you can earn, in the form of earnings and based on history, by buying the securities at the trading price.
In general, those who pay more dividends have a higher DY. With this, it may be interesting to look for companies with stocks that stand out in this aspect. However, it is also important to be careful with the use of the indicator.
The most recommended is to use it to compare companies in the same segment. As different sectors have different potentials for the payment of earnings, it makes more sense to have such a basis for comparison.
You also need to know how to interpret the dividend yield data. For example, look for a long history of the indicator to verify that good results are not just one-offs. And be sure to understand the context of the share price. After all, the DY is very influenced by the current price.
Who will be the biggest dividend payers of the next decade?
In this article, you’ve already seen which are the biggest dividend payers of the last decade, until 2021. But what to expect in the next 10 years?
Before answering this question, it is necessary to note that investing in stocks is variable income and there is no way to guarantee results. So, even good payers today may not keep up with the trend in the future — and the opposite is also true.
Therefore, it is not possible to say which will be the best dividend payers on the Brazilian stock market, the US, or any market with absolute certainty. It all depends on the company’s performance in the market, its competitors, possible changes in the dividend policy, and other factors.
After considering all these aspects, it is worth knowing that the sectors already presented can maintain the conditions that favor the distribution of dividends. Thus, focusing on sectors rather than specific companies can help to assess the scenario.
However, companies from other segments can also stand out. In particular, those businesses that do not need such frequent investments and that can share part of the cash with shareholders.
At the same time, think that the tax reform can affect the dynamics regarding this type of payment in Brazil. As everything depends on the passing of the law and the changes that this can cause, it is worth paying attention to changes in the stock market and in company policies.
Tax reform and the impact on dividends
As you have seen, one of the positive aspects of dividends is their exemption from Income Tax. However, this is an issue that could change if the tax reform, proposed by the Ministry of Economy in 2021, is approved as presented.
The second part of the reform was presented in June 2021 and Bill No. 2337/21 was approved in September of the same year. In the original proposal, dividends would be taxed at 20%.
With the approval of the PL, the suggested taxation became 15%. However, as of early November 2021, the law had not yet been put to a vote and, therefore, was not approved. But it is necessary to be attentive to understand what such a change can cause.
In practice, the tendency is for the largest dividend payers to be affected in terms of attractiveness. Shareholders looking to earn a return can re-evaluate their investment and look for businesses with greater growth potential.
In any case, it is important to consider that investing focused on dividends must be long-term. Therefore, care must be taken not to let changes to certain rules affect the entire strategy.
The ideal is to consider your profile and strategy and evaluate the potential return with dividends. It is also worth comparing with the risks that other less consolidated actions can offer. So you can do a risk and return analysis to base your decision making.
Tips to diversify your dividend-focused portfolio
After knowing all these questions, you may be interested in investing with a focus on dividends. In this case, it is worth thinking about portfolio diversification. After all, it is not advisable to allocate all your money to just one or a few companies.
To learn how to do it, you will follow steps that can help you make the decision. Check out!
Identify your investor profile
To invest consciously, it is necessary to start by considering your investor profile. As the stock market is a variable income, it presents more risk and volatility. Thus, it is usually more suitable for moderate or bold investors.
However, conservatives may also consider focusing on earnings. As companies can be more consolidated and have less unpredictable results, the risk may be lower for some of them. So it pays to understand what your tolerance is.
Think about your financial goals
Another point to consider involves your financial goals. As we have seen, there are investors who seek a high appreciation when investing in stocks. In this case, the objective will be to profit from the company’s growth.
This is the case for those who adopt the value investing or growth investing strategy, for example. The first focuses on cheap stocks and the second on papers with great growth potential.
If your intention is to find the biggest dividend payers, your goals are different. After all, you’ve seen that companies of this type tend not to grow as much while the focus is on distributing the proceeds.
Because of this, dividend-oriented investment is usually more aligned over the long term. Thus, it is possible to take advantage of the consolidated return over time. So, evaluate your goals and their deadlines to see if the strategy would align.
Evaluate the dividend yield of companies
Once you’ve identified your personal characteristics, it’s time to analyze the business’s dividend yield. It is the most relevant indicator to measure a company’s ability to pay dividends on the stock exchange.
Therefore, this index can serve as a comparison between the available roles and, depending on the case, it helps as a tie-breaking criterion between similar alternatives.
Do a thorough fundamental analysis
Although DY is important for finding the highest dividend payers, it should not be the only criterion used. After all, a company with above-average dividend payouts may present higher risks or aspects that do not interest you.
Therefore, the idea is to perform a robust fundamental analysis. It is necessary to consider several elements, such as indebtedness, return on equity (ROE), company management, and other relevant criteria.
It is important to focus on companies that are healthy and robust, especially with a long-term goal. Thus, there are more chances to receive frequent dividends and to count on appreciation over time.
Look for recommended wallets
You also have the chance to invest based on so-called recommended portfolios. They are designed by analysts, who do all the work of evaluating the fundamentals of the business and finding the ones that meet specific objectives.
In this case, it is feasible to find portfolios that bring together companies with better dividend payouts. With a recommended portfolio focused on earnings, you will be able to know the composition that analysts consider ideal to receive this type of result.
In addition, they are accompanied by a report justifying the decisions and are periodically updated. So, just follow the indications to have a portfolio dedicated to this objective, in a practical way, and with professional support.
How to invest in dividends with little money?
It is not necessary to have a very large amount to invest in stocks. So, in addition to the tips you just checked, it can be interesting to understand how to make the investment even with little money.
Although the receipt of dividends is greater the more significant the investor’s participation, it is not always possible to invest a greater amount immediately. On the other hand, it will be possible to contribute little by little and increase your equity.
Next, you will understand which points to consider to take advantage of the highest dividend payers even with little money. Follow up!
Build a financial plan
Faced with the need to invest with little money, financial planning becomes even more important. Therefore, it is worth creating a budget, considering the gains and expenses and the provision for the investment.
It is interesting to cut unnecessary expenses to have more resources to invest. In addition, it is worth planning to make frequent contributions. Not only is this a way to create a habit, but it also allows you to improve your earning potential with earnings.
Make frequent contributions
When you do financial planning, you can set a monthly amount to invest. That way, even if it’s a little money, there will be the opportunity to accumulate the amount over time. Soon, you will have more and more shares and can receive more and more dividends.
To buy the papers little by little, it is necessary to resort to the fractional market. Generally, shares are traded on the exchange in lots of 100. However, it is possible to buy units by adding the letter F at the end of the ticker of the desired share.
Consider reinvesting dividends
Once you have dividend-paying stocks in your portfolio, it is worth considering reinvesting the dividends received. In this way, it is possible to increase your contribution capacity, even without increasing the financial availability of your budget.
Therefore, create a routine of using the amount received to buy new shares, if you want to increase the contribution of the largest dividend payers.
To invest in stocks and take advantage of companies that pay good income, it is necessary to have a quality financial institution. With BTG Pactual, you can enjoy everything that the largest investment bank in Latin America has to offer.
By opening your account with us, you will be able to access the home broker to enter the stock exchange and carry out negotiations. In addition, you can count on a complete portfolio of fixed-income products and investment funds.
You will also be able to take advantage of the web platform and the app, as well as specialized content from our research team. Also, as you already know, we offer recommended portfolios that can help guide you on how to invest!
As you have seen, turning to the highest dividend payers can be a good opportunity to earn passive income and increase the return potential of your portfolio. However, you need to perform a thorough analysis to make decisions — and not just focus on historical performance.