As we head into 2023, investors should remain cautious and expect the unexpected. Globally, when the majority of stock indices were in the red zone, investors were left to pivot their strategies accordingly. One such proven strategy during these times was investing in dividend-paying stocks. This strategy will continue to help investors in the future as well, as these stocks perform better than the overall market during difficult times.
Today, we are discussing two such companies from the German market: Bayerische Motoren Werke Aktiengesellschaft (DE:BMW) and Vonovia (DE:VNA). These companies are currently offering a dividend yield of more than 7% and also have Buy ratings from analysts.
Talking about dividends, TipRanks has a wide variety of tools for investors to pick the right stocks. The Dividend Calculator is one tool that gives a complete overview of dividend payments for any particular stock. It can be customized as per the individual’s investment budget.
Let’s discuss the stock in detail.
Bayerische Motoren Werke Aktiengesellschaft (BMW)
A global brand of luxury automobiles, BMW’s share price has been on an upward journey for the last few months. The company’s stock has gained around 14.5% in the last six months.
Despite the challenges in the automobile sector, BMW posted impressive numbers in its third-quarter results for 2022. Profit before tax was € 4.1 billion, up 20% from the same period in 2021. The company’s focus on the electric market was also visible in the results. Electric vehicles accounted for 16.8% of total deliveries, up from 13.2% in the third quarter of 2021. The company’s results were well supported by higher pricing and improved demand for electric vehicles in the market.
The company declared a dividend of €5.8 per share in 2021, which was a payout of 30.7% of net profits. The company is expecting stable growth in its profits over the next two years, which suggests more growth for dividends as well.
Here, we have used the Dividend Calculator tool to generate the returns for BMW stock for an investment of 100 shares at €85.49. The total dividend amount after 10 years will be €14,022.9 with an assumption of 2% annual dividend growth.
BMW Stock Forecast
According to TipRanks’ analyst consensus, BMW stock has a Moderate Buy rating. The average price forecast is €92.86, which shows a change of 8.6% from the current trading price of €85.5.
Vonovia
Vonovia operates in the residential real estate sector in Germany. The company’s residential units are spread all across Germany.
Similar to BMW, the company’s performance improved in the first nine months of 2022 over previous quarters, despite a challenging housing sector. Vonovia posted sales of €4.6 billion, which increased by 31.4% on a year-on-year basis. The company completed 1500 flats during this period, up by 13%. For 2023, the company is looking at higher demand in the residential sector and targeting a faster completion process. Labor shortages remain a concern for the company, but the forecast for 2023 is stable.
Speaking of dividends, Vonovia has been consistent in increasing its payments over time. Furthermore, with a dividend yield of 7.5%, the stock finds a home in investor retirement portfolios.
As per the TipRanks Dividend Calculator, if we buy 100 shares of Vonovia, the total dividend payment after 10 years will be around €2,937.4 at a 2% growth assumption.
Is Vonovia a Good Stock?
According to TipRanks, Vonovia stock has a Strong Buy rating, based on nine Buy and three Hold recommendations.
Analysts are bullish on the price appreciation, given that the stock has fallen by 53% in the last year. The average target price is €35.46, which has an upside potential of 55%.
Conclusion
Both BMW and Vonovia have posted growth in earnings in their results. This itself is one of the biggest criteria for share price momentum in the long run. Furthermore, higher dividend income is beneficial during times of inflation.
