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5 German Dividend Growth Stocks (Part II)

Mar. 08, 2018 3:41 PM ETFSNUY, SBMDY, FUPBY39 Comments
Torsten Tiedt profile picture
Torsten Tiedt


  • Finding German dividend growth stocks using traditional criteria is a pain.
  • Years of dividend increases is not a universal indicator for dividend growth.
  • The conjunction of stability (correlation) and growth (CAGR) is.
  • I owe you three more German dividend growth stocks. Here they are.

Recap: 3 takeaways of universal importance

In part I of “5 German Dividend Growth Stocks,“ I gave a short introduction into the German stock market including differences regarding dividend policy.

First takeaway: Finding German dividend growth stocks is pain, but it's possible if we reconsider the plausibility of our criteria for the German stock market. Using common U.S. criteria is pain, because continuous dividend increase is of lesser importance in Germany than in the U.S. Therefore, “years of dividend increase” acts as a killer criterion. Although I cover 107 of the most popular German stocks, of which all but five pay dividends, I only found 4 (in letters: four) stocks matching all criteria. As a reminder, here they are:

  • Stable earnings growth in the last 20 years (correlation at least 0.8 out of 1.0).
  • Yearly earnings growth in the last 5 years of at least 5 percent on average.
  • Stable dividend growth in the past (correlation at least 0.9 out of 1.0).
  • Yearly dividend growth in the last 5 years of at least 5 percent on average.
  • No decreasing dividends for at least 10 years. <= Killer criterion!!!
  • Positive outlook for the earnings of the next business year.

Because I needed 5 stocks (the title was already written), I added SAP (SAP) to the list. 7 years of consecutive dividend increases at least.

Second takeaway: Consecutive dividend increases is a not only a killer criterion, but also a weak one to measure the quality of dividend growth in Germany. In the U.S., a missing dividend increase is considered a fail. In Germany, it’s not. My database contains 85 dividend aristocrats from the U.S. Its average payout ratio based on earnings of the last 12 trailing months is 54.3%. Based on free cash flow, the payout ratio rises to 78.2% (an alarming number - Trump’s Tax Cuts and Jobs Act to the rescue!). When

This article was written by

Torsten Tiedt profile picture
Torsten Tiedt is a senior developer in the investment industry in Frankfurt, Germany. He was working for KPMG for eight years. During this time, he was part of a team of specialists dedicated to analyze security portfolios of international funds, hedge funds and banks. Among other, he participated in the liquidation of Lehman Brothers and the first banking stress test of the European Central Bank.Later he took the lead in developing software for securities lending in a small private company, before he created his own start-up to develop a new kind of stock screener dedicated to long term dividend growth investors: DividendsStocks.Cash.

Analyst’s Disclosure: I am/we are long FSNUF, SAP, FUPEF, DHR, RHHBF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (39)

11 Jun. 2018
In the case of a German share where there is a 26 % WHT I understand that 15 % can be reclaimed in your country of origin from the taxman and the other missing 11 % has to be claimed directly with the company you are invested in, is this correct?
Or am I misunderstanding something here?
Torsten Tiedt profile picture
Because I am German, my personal experience is the other direction: reclaiming taxes from countries like Danemark or Switzerland.

In general there must be an agreement between Germany and your country about tax reclaim. Reclaim is done at tax administration, not the company.
I heard, one has to wait a few years for the refund from France and Italy.
Gold Finder profile picture
That is why you can send documents beforehand so the correct number is deducted. This is avialable to direct holders
"Why no Swiss stocks?"

Swiss withholding tax is 35%. The highest in Europe.
Gold Finder profile picture
It does not really matter how high it is. Anything more than 15% can be reclaimed. One could even argue that Switzerland is the most "stimulating" of them all to reclaim since 20% of your dividend lays in the balance.

Ireland for example takes 20%, reclaiming this 5% is hardly worth the hassle.

We are talking about 15 euro to reclaim on a 10k position that yields 3%.

The swiss however in the same example: 60 euro. That is already starting to be worth it.
"Is there a German equivalent to Seeking Alpha?"

Maybe this one: http://bit.ly/2DfiXGu

My German stocks are: SAP, Munich Re and Allianz. And 2 Dutch: Ahold and Unilever.
No French, Swiss or Italian stocks, because of withholding tax.
Rhystic Scrying profile picture
Thanks for that.
I also hold 2 Dutch stocks: Unilever and Heineken.
And 1 French stock: Total Oil.
Very happy.
Why no Swiss stocks?
Torsten Tiedt profile picture
This is a very new German platform focused on German stocks, too:


The website is still young, but backed by solid founders and intended to grow. Even more important: analysis are very solid.
Are there companies in solar panel production that are public? They should beat the Chinese panels on quality alone
Torsten Tiedt profile picture
As far as I now, German solar panel production got wiped out by the Chinese, after it become mass market.
Interessanter Artikel, danke!
Torsten Tiedt profile picture
You're welcome, wie der Amerikaner sagt :)
Rhystic Scrying profile picture
"Do you think the combination of stability and growth may help you finding dividend growth stocks in- and outside the U.S.?"

I'm a US ex-pat living in a German-speaking country.
Thank you for this article. It's difficult to do research on any but the largest European companies regarding metrics and dividend policies.
Is there a specific website that you use to do your screens?
Is there a German equivalent to Seeking Alpha?

I try to strike up conversations with the natives about investing and dividends and I'm either met with dull stares or outright animosity. Any suggestions?

An observation: European countries seem to pay more attention to payout ratios, which can be volatile.

I'm currently long ALV, DTE, SAP. I will definitely look into SBS.
Again Danke,
Gold Finder profile picture
In general the public in Europe is less aware of investing. We do not have systems like in America where people can save themselves for retirement.

We are forced to join into public pension funds or the pension even goes just directly through the tax system. (tax payers fund retirement of the olderly)

Because of the high taxes in Europe, the middle class also has not really the funds to invest. In my experience, domestic investing websites suck, that is what led me to SA in the first place.

And yes, most European companies have policies of "we pay x% of our EPS in dividends". Making dividends much less reliably. The good part about this is that the financials of a company are better than their American counter parts during downturns.
Torsten Tiedt profile picture
Part I. regarding public pension funds: sad but true.

Part II. regarding fixed pay-out-ratio: also true, but not so sad ;)
Torsten Tiedt profile picture
Thanks for picking up my questions.

"It's difficult to do research on any but the largest European companies regarding metrics and dividend policies."

True. That's why I created my own reasearch plattform. Screenshots are taken from there. I try to cover the most popular stocks worldwide, especially in Europe and US. Website exists both in English and German:

- https://aktienfinder.net (German)
- http://bit.ly/2DcWlql (English)

Hope you like.

Yes, Gold Finder and me confirme you observation about dividends more closely related to earnings than in the US.

Gern geschehen :)
Thanks for the interesting article!
The thing is,most european countries have too high withholding tax (inc. Germany) for me to consider buying dividend stocks from and i live in Europe,the final taxation of dividends could go up to 40-55% which makes the owning them pointless for me.
It's a shame the tax agreements between countries are not upheld and my local taxman will always take his share regardless how much the originating country withheld already.
Owning high growth stocks from these countries makes more sense.
Gold Finder profile picture

Your situation sounds belgium to me? They are horrible, they do not even deduce the 15% from the domestic tax obligation. You will pay 15% in Germany + 35% will be stolen by Belgium. But the difference between the 26.375 and 15% can be refunded. It takes some paperwork though.

Belgium is horrible and should be unitied with the Netherlands asap!...

It is also horrible to see that the EU does not help at all in enforcing this 15% tax. Big banks can easily do the paper work, the small fishes are f*cked again.

I only own US, dutch, German and UK stocks.
Dutch since they fit best to the dutch tax regime. UK since no dividend tax is levied. American ones since I only pay 15% tax which can be deducted from my own capital taxes in the Netherlands. Germany because it is too big to be ignored and focusing the paper work on one country is doable. Especially if 30% of my portfolio is german and therefore its effords will reward me more.
Torsten Tiedt profile picture
Sorry for bad experiences regarding tax administrations. Regarding Germany, I cannot complain. Tax is about 26% (still above US levels, I know) and should't go up as far as I known. After avoiding Spain and France, I also have no problem to reclaim withhold dividends.
Gold Finder profile picture
Torsten Tiedt,

you can easily invest in France. For example Air Liquide has excellent IR and if you sent them the right documents before ex-dividend, the correct 15% will be deducted.

In addition, this 15% is fully deductable from your German tax liability.
Gold Finder profile picture
Nice, my article about fresenius is right above yours. While no one normally writes about this!
Torsten Tiedt profile picture
Indeed. I just read your article. Our fundamental findings are basically the same. Regarding pricing, we use somewhat different approach, although I partly calculate with Graham formula for slow growing companies (similar to FastGraphs).
Gold Finder profile picture
If this company keeps growing earnings as it did and as it predicts, I do not really worry about buying at 65 or 60 euro. I am 23 and retirement is only going to happen in 40 years. The 80 euro region at lower EPS was just too expensive and that is why I only recently pulled the trigger.

My other German holdings:
Merck KGaA

I recently sold out of Volkswagen, horrible investment. I bought at 150 euro nearly half a decade ago, I saw 250 euro on the board and 90 euro. I sold at a slight profit at 165 in 2018, while other names doubled in this time. I think I will never invest in car companies anymore.

Bayer also disappoints me, I think I bought a bit too high and the Monsanto acquisition also keeps pressing down the stock price. Especially now that the entire left winged european population is now against this merger.
Hi Thorsten, thanks for the great article. Fresenius doubles the dividend every 6 year, so when you buy today with 1% in 12 years you have 4% yield. Time is you friend...
Torsten Tiedt profile picture
True. In the long run, dividend growth is your best friend - next to Mr. Capital Gains, of course. After 10 years my personal yield of BASF is 11.6%, followed by Novo Nordisk with 10.3%. This nicely softens temporary price drops from a psychological point of view.
That´s why I buy just only UK and US stocks.
Torsten Tiedt profile picture
As many other do...
Why would anyone in the USA consider these stocks for "dividend growth"? Growth/capital appreciation, YES - - but paltry dividends?
Torsten Tiedt profile picture
Got the point. But I am not aware of any definition of minimum yield for dividend growth stocks. Anyway, I did not try to persuade anyone that Germany is fatherland of dividend growth, but drawing the big picture instead.
wjochem profile picture
There are some tax treaties that don't tax dividends if in an IRA. At one time Germany and Canada were part of that group, not sure about now.
26% withholding tax is not of interest to me when I pay 15% tax here in the U.S. If you have to go to Europe for dividends, UK, Spain, Netherlands, & Finland have lower rates ranging from 15% to 19%, much better than Germany.
Torsten Tiedt profile picture
True. Additionally we must be careful about double taxation. Double-tax agreements exist, but sometimes we need to reclaim some tax later. Years ago, I made bad experiences regarding spanish and french tax reclaims. It was so complicated that I gave up.
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