Finance: Investing: What dividends mean for stock savers

In the spring, many companies pay out money to their shareholders. This also benefits owners of equity funds. But there are peculiarities.

In spring the big ones hold up stock exchange company traditionally hold their general meetings. There, the shareholders decide how much money the company will pay them for the past financial year. In April it was Telekom’s turn, this week Allianz and Post, among others, followed next week by BMW, Volkswagen and SAP.

Also who one exchange traded fund (ETF) has, can dividends get, but not every type of ETF passes them directly to investors. An overview:

Dividends briefly explained

The principle of dividends is simple: if a company has made a profit, it can either keep it in the company and use it to finance new projects, for example. Or it can pay out the surplus, at least in part, to its owners. To which also belong retail investorif they own shares in the group. Anyone who is a shareholder on the key date will receive the payment.

In Germany, this key date is usually the date of the general meeting. A few days later it lands distribution then on the clearing account of securities accounts. At Mercedes-Benz, for example, there were five euros per share at the beginning of May. Other deadlines apply to foreign companies; in Great Britain or the USA, for example, several distribution dates per year are possible.

How dividends affect ETFs

However, dividends sometimes flow “through the gang”, as it would be called in billiards. This is the case when someone did not buy the stock directly, but Shares of an ETF or an active equity fund. The dividends end up there first. What then happens to it depends on the type of fund.

First, there are the distributing ETFs: They pass on the dividends to the investors. This does not happen immediately, but as a collective transfer once or several times a year.

It is different with accumulating or reinvesting ETFs: These buy new shares from the dividends. Savers notice this because the share price (the price) of a reinvesting ETF develops better than that of a distributing ETF – but the comparison only makes sense if both ETFs are the same stock index rebuild, like that dax or the MSCI World.

Dividends are not “free money”

The impression is often created that dividends are free money – especially in sales talks. But both dividend-paying funds and individual stocks are worth less after the dividends are paid than they were before. On the day of distribution a share price falls namely by their amount. Again, the example of the Mercedes share: on the day of the shareholders’ meeting, it cost around 67 euros, on the next trading day trading started at around 62 euros.

Therefore, it makes little sense to base your stock selection solely on the amount of the planned dividend. Because the dividend is only taken money, not given. It’s also nonsensical supposed “trick‘ to buy a share in good time before the general meeting, collect the dividend and then release it again. Although the course also changes in general due to supply and demand, such movements usually balance out quickly, but there is no risk-free opportunity for returns here.

Volkswagen and Metro offer two stock types. The preferred shares receive a higher dividend than the common shares, but have no voting rights. Some companies choose not to pay dividends at all, preferring to reinvest the money. Amazon, Tesla or Meta (formerly: Facebook) are prominent examples.

The Geld-Ratgeber Finanztip recommends, however, to easily access the globally investing ETF anyway, instead of having to spend a lot of time looking for individual stocks. This is often faster and more successful. the dividend yield is currently around 1.8 percent for ETFs on the MSCI World.

That is significantly more than the current overnight interest rate – even if two different things are being compared here, because investing in the stock market is known to be far less predictable than investing in a savings account. Who in the past but at least 15 years stuck with it has always gotten back at least the money invested – and in many periods significantly more.

What about the taxes?

In Germany, the custodian bank takes care of the withholding tax on dividends and ETF distributions. Investors don’t have to do anything – but they can exemption order and a distributing fund make optimal use of their allowance. For example, 801 euros per year (married couples: 1,602 euros) in capital gains are tax-free – this also includes savings interest.

For stock ETFs, due to the so-called partial exemption of 30 percent, even income up to 1144 euros (married couples: 2288 euros) remains tax-free. This amount can be approached with the help of a distributing ETF. The money raised can then be invested in new ETF shares depot inventory to keep growing. When the allowance is exhausted, it continues with an accumulating fund.

This article appears in cooperation with The money guide for consumers is part of the Finanztip Foundation.

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