Stock picking

5 dividend stocks that yield more than BTPs

2024 is the year of bonds but these 5 dividend stocks could yield more than BTPs.
The debate between the guaranteed return of bonds and the dividends of stocks has always been at the center of investors' decisions.
According to analysts, with forecasts of a possible interest rate cut by the ECB in 2024, it may be time to reevaluate your investment strategy.
While (newly issued) bonds could see their yield decrease – as already happened to 5-year BTPs in the Treasury auction at the end of January – stocks with consistent dividends could offer an interesting alternative.
Investors looking for returns on fixed income have already seen first-hand a decrease in gross returns on the 5-year maturity, which went from a rate of 3.64/3.68% to 3.14%.
But what are the best options to consider? And what are the associated risks? We analyze 5 dividend stocks that promise higher returns than BTPs and their prospects for the future.
1) British American Tobacco (BTI) British American Tobacco offers one of the highest yields on the market, with a dividend yield of 9.82%.
However, the tobacco sector has come under significant pressure in recent years due to declining cigarette sales and a lack of product innovation.
Despite this, income investors continue to look favorably on the sector for its generous dividends.
Although British American Tobacco recently posted an impressive $31 billion writedown, reflecting challenges in the U.S.
cigarette industry, its dividend appears to be sustainable.
However, the stock's growth potential may be limited, given ongoing regulatory uncertainty and challenges in finding successful new products.
2) Bayerische Motoren Werke AG (BMW) Bayerische Motoren Werke AG, better known as BMW, is another company with a high dividend yield (8.70%).
BMW shares have recently shown some volatility on the markets, offering investors purchasing opportunities at convenient prices, below 100 euros.
However, while the current price may appear to reflect fair value, the auto company's growth prospects do not appear promising, with earnings expected to decline in the near future.
Deutsche Bank reiterated its "buy" on the stock, but reduced the target price to 125 euros.
While high beta may indicate greater volatility, investors should weigh the company's long-term prospects.
BMW Group sold a record number of cars in 2023, exceeding 2.6 million, thanks to close collaboration with dealers and strong sales performance.
Sales of fully electric vehicles have reached 15% of the total, with forecasts to exceed 500,000 electric vehicles sold in 2024.
3) Mercedes-Benz Group Mercedes-Benz Group offers an attractive investment opportunity, with superior intrinsic value at the current share price.
The dividend yield stands at 8.47% for its shareholders.
However, the company may face future financial challenges due to expected negative earnings growth in the automotive sector.
Recently, analysts from UBS and JPMorgan reiterated their "buy" rating on the stock, maintaining a target price of 78 euros.
Despite attractive long-term growth prospects, investors should consider stock market volatility and uncertainty in the industry.
Mercedes-Benz Group said cash flow from industrial operations last year exceeded both their forecast and market expectations, thanks to lower capital requirements and favorable cash generation.
Free cash flow from industrial activity for the full year was 11.3 billion euros, beating consensus forecasts of 9.9 billion euros.
The company forecast industrial free cash flow in line with the previous year, when it was $8.13 billion.
Mercedes-Benz attributed the improved cash flow to lower levels of working capital and a favorable cash conversion rate in the industrial business.
Full results for 2023, along with fourth-quarter earnings data, are expected on Feb.
4) Basf SE Basf SE started 2024 with the handbrake on and from the highs at the beginning of the year at around 49.50 euros it collapsed below 45.
This trend reflects the challenges the company is facing, with expected growth of relatively modest turnover in the near future.
Financial data from recent years indicates an 18% decrease in revenues, a disappointing trend compared to other competitors in the sector.
However, it is important to note that over the long term, BASF has shown revenue growth of 25% in total over the previous three years.
Despite the current difficulties, investors may consider the stock an attractive option, especially value investors, given its attractive valuation and strong outlook.
The stock also offers a dividend yield of 7.64%.
Analyst estimates predict annual revenue growth of 1.7% over the next three years, in line with expectations for the chemical industry as a whole.
This reflects the fact that BASF trades at a similar price-to-sales ratio to the industry, indicating that investors expect moderate growth and are willing to pay a fair price for the shares.
5) Bayer AG Bayer AG is considered by several analysts to be among the best stocks in the healthcare sector, with shares trading at a discount of 62% and the dividend yield exceeding 7%.
Bayer's healthcare division, with a strong portfolio of recently launched drugs and excellent exposure to biologics, should support steady cash flows over the long term.
The stock's current valuation suggests that Bayer may currently be undervalued.
Bernstein recently confirmed his "buy" rating on the stock, however reducing the target price to 50 euros from the previous 59 euros.
The recent acquisition of Monsanto has significantly expanded Bayer's competitive position in the agricultural sector, although it has led to increased legal exposure over issues involving glyphosate use.
Last week, a Philadelphia court ruling forced the German company to pay $2.25 billion in compensation for physical injuries related to the herbicide Roundup.
Bayer has settled many previous cases for $9.6 billion, but more than 50,000 remain pending.
While uncertainty is high, Bayer's strong position in healthcare and agriculture, along with its attractive valuation, could make the stock an opportunity worth considering.
DISCLAIMER The information and considerations contained in this article should not be used as the sole or primary support on which to make investment decisions.
The reader retains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk propensity and his time horizon.
The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to public savings.

Author: A.W.M.

Who am I? Let me introduce myself, I'm AWM! Welcome to the world of A.I. (Artificial Intelligence) of the future! I'm AWM, an acronym for “Automatic Websites Manager,” the beating heart of an ever-evolving network of news websites. Read more...