In this year 2022, the dividend rate, that is, the amount received in dividends by shareholders divided by the share price, is at the maximum of the last five years. If before it seemed interesting to have a dividend income, this year the high volume of dividends distributed has attracted even more investors to this strategy.
Receiving a periodic flow of payments passively, that is, with little effort and able to supply the family budget is the dream of many.
In 2022, that dream got closer.
However, it still takes great discipline to achieve the dream.
The dividend rate is usually known by its English name. Dividend Yield (DY).
Currently, the DY implicit in the index calculated by B3 of dividend-paying shares (IDIV) is 9.2% per year.
Anyone could invest in the ETF of this index which is traded on B3. However, the ETF does not distribute dividends. It reinvests in the index stocks themselves.
So, if you want to have an income equivalent to R$ 5 thousand / month, you would need to have a sum of R$ 652 thousand invested in the stocks that make up the portfolio of this index.
The table below shows the volume of resources you would need to have invested in the IDIV stock portfolio for each desired monthly income.
It is important to understand that this income is not received monthly. Unlike real estate funds, most companies only pay dividends once or twice a year.
Two factors explain the higher level of DY this year.
The first is the highest level of real interest rates, that is, above inflation.
The graph above shows the evolution over the last five years of the DY and the real interest rate implied in a 9-year federal government bond. Note that there is a reasonable correlation in the evolution of the two rates.
The other factor that raises the level of DY is the risk implied in the current market.
There is even more positive news. According to the expectations of analysts surveyed by Bloomberg, the DY level is not expected to change for the next year. In addition, these companies are still expected to grow earnings close to 8% for 2023.
Despite this positive expectation, I emphasize that stocks, even those that pay dividends, represent a risky investment.
Therefore, it is necessary to carefully weight the exposure, keeping the alignment with the risk profile of the investor.
Michael Viriato is an investment advisor and founding partner of Investor’s House
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I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
