The benchmark interest rate rose again for the first time in five years. Since March, when the Central Bank started this movement, the Selic has already gone from 2% to 5.25% per year. And when that rate rises, the challenge of stocks on the stock exchange that are good dividend payers grows.
This is because Selic is one of the main references in the financial market. When this rate rises, the yield of various fixed income investments, such as savings, DI funds and Treasury Selic, also increases. On the stock exchange, market professionals and investors use the base interest rate to check if the dividends obtained with a stock are good or not. See below what Selic has to do with dividends and which shares exceed the interest rate.
Because the Selic is it also a reference on the stock exchange?
The basic interest rate is the main reference for fixed income investments, such as savings, Treasury Selic and backgrounds DI, for example. You’ve already seen here that when this rate rises, it takes the income from these investments with it.
Stocks represent a type of investment in variable income that is not directly influenced by Selic because the price of these securities depends more directly on the performance and equity of the companies. But still, the Selic serves as a reference for the applicator power make comparisons with other investments.
THE Selic it is always a market reference because it helps investors to get a sense of the performance of their application, showing what is high or low.
jennie Li, stock strategist at XP Investments
How to Calculate Dividend Yield
the strategist of XP Investments highlights that the Selic it can be used, for example, as a reference for the investor to evaluate the income paid by a share through dividends.
Dividend is a way a company shares with shareholders — including investors in the Handbag- a portion of the profit earned each quarter, semester or year.
The yield of a dividend is calculated by the ratio between the value of the share and the profit distributed by the company. For example, if a share costs BRL 100 and the owner of that role received BRL 5.00 in dividends in the year, the gain, called dividend yield, was 5%.
Comparing the dividend with the Selic
What some analysts and investors do then is to compare this dividend yield with the Selic. And as the benchmark interest rate is rising, the life of dividend-paying stocks has become more difficult because the benchmark bar has also gotten higher.
Then see a list prepared by the stock strategist at XP Investments with 10 shares that are accompanied by it and that have a dividend yield superior than Selic.
jennie Li considered the Aug. 4 share price and the earnings distribution estimate for 2021.
- Bank of Brazil (bank): 13.7%
- Engie Brazil (energy): 11.7%
- Bradesco (bank): 9.3%
- Taesa (energy): 9.2%
- Copel (energy): 9.2%
- BB Security (insurance): 8.6%
- Plan & Plan (builder): 8.5%
- AES (energy): 8.2%
- santander (bank): 8.1%
- Cesp (energy): 7.9%
Source: XP Investments
Are Dividend Paying Stocks Still Worth It?
According to a survey by the Central Bank through the Focus Bulletin with more than one hundred financial institutions and market consultants, the Selic will continue to rise until reaching 7.50% at the end of this year. Thus, more companies will find it difficult to deliver to the investor a dividend yield higher than the basic interest rate.
In addition to the higher Selic, equity investors may face yet another challenge. Dividends paid today are exempt from income tax. But the government wants to start taxing this application, with a rate of 20%. At least that is what is in the tax reform proposal that is still under discussion in Congress.
For analysts, even with the high Selic and this tax collection, if any, good stocks that pay dividends are still an option for investors. They have three reasons for this:
- Share appreciation: the dividend is an extra gain that the investor has when investing in shares, without having to dispose of the asset. In addition, it has its own stock appreciation over time.
The rise in Selic may lead some people to question whether it is worth betting on good dividends. But you don’t invest in stocks just for the income, but for the growth of companies. Anyone who invests in shares is becoming a partner in a company, so they also have to focus on the company’s growth.
Jennie Li, stock strategist at XP Investimentos
- Lower volatility: good dividend-paying stocks are mostly mature companies — that is, they are not newcomers who are still in the expansion phase — and that operate in sectors that are also more stable. These are companies that show sales and profits without major fluctuations over the years. Therefore, they are stocks that, even in periods of crisis or instability, do not suffer as much variation in prices.
At a time of greater market volatility, stocks that are good distributors of dividends tend to be less volatile, and this helps to reduce a portfolio’s losses when the Ibovespa falls.
Eduardo Nishio, chief analyst at Genial Investimentos
- Diversification: having shares that pay dividends is still a way to diversify the investment portfolio. With these actions, an investor gets a form of regular income without having to get rid of the investment and own companies whose quotation varies less than the market average.
Good dividend payers represent a form of diversification because they include some constant income over time in a portfolio and represent a defensive position in times of volatility.
Fabio Figueiredo Filho, private investment advisor at Messem Investimentos