Investing in dividend-paying stocks can provide a stable income, even when the market is down. During uncertain times, dividends can act as a buffer against losses and contribute to higher total returns in the long run.
However, if the market remains weak for an extended period, companies may need to reduce or eliminate their dividends. Therefore, it is not always wise to focus solely on stocks with the highest dividend yield when choosing investments, that is, dividends in relation to the stock price. This insight comes from the fund evaluator Morningstar.
Here is a list of the highest dividend-paying stocks on the Stockholm Stock Exchange right now, according to the Morningstar Sweden index, which covers the largest companies in Sweden.
– Corem Property Group D: 9% expected dividend yield
– Nordea: 8% expected dividend yield
– Sagax D: 6% expected dividend yield
– Swedbank A: 6% expected dividend yield
– Cibus Nordic Real Estate: 6% expected dividend yield
– Öresund: 6% expected dividend yield
– Handelsbanken A: 6% expected dividend yield
– Telia: 6% expected dividend yield
– Tele2 B: 6% expected dividend yield
– SEB A: 5% expected dividend yield
Currently, the real estate company Corem Property Group’s D shares top the list of stocks with the highest expected dividend yield at 9.0%. However, since these are D shares, they come with certain additional risks for investors. The same applies to Sagax D shares, which rank third on the list.
D shares differ from regular A and B shares in several ways. Apart from having significantly limited voting rights – one-tenth of a vote compared to a common share – the dividend has a set ceiling. This means that D shares function more like an unsecured fixed-income investment than a traditional stock.
Since holders of D shares have fewer rights, this is often offset by a higher dividend yield.
The list of high dividend-yielding stocks also includes the four major banks: Nordea, Swedbank, Handelsbanken, and SEB. All of them have recently announced their financial results for 2024, and it’s good news for dividend hunters. The banks are increasing their dividends from a total of 102 billion SEK the previous year to 155 billion SEK this year.
Other stocks with high dividend yields are Telia and Tele2, which currently have an expected dividend equivalent to just under 6% of the stock price. Over the past 5 years, these companies have been able to provide a good dividend to their shareholders.
However, it is important to remember that stock prices fluctuate constantly, meaning that dividend yield can quickly change with significant price movements. Another factor to consider is that, for example, Nordea is considered a Finnish company even though it is listed on the Stockholm Stock Exchange. The dividend tax is determined in Finland.
Finland has a withholding tax on dividends for foreign investors. The standard rate is 30%, but thanks to tax treaties between Sweden and Finland, it can be reduced to 15%. You may need to reclaim the excess from the Finnish Tax Administration.
For Swedish companies, dividends typically coincide with the companies’ annual general meetings. Therefore, the majority of payouts on the Stockholm Stock Exchange occur in the spring, primarily in April and May.
In conclusion, while investing in high dividend-yielding stocks can provide a steady income stream, it is essential to consider the risks and potential fluctuations in dividend yield, especially in the context of changing market conditions and tax implications. By diversifying your portfolio and staying informed about company performance and market trends, you can make informed decisions to maximize your returns and build a resilient investment strategy.