The change of year is one of those moments that requires reviewing the investment portfolio and tune it up for what is expected or readjust the risk profile. Tipping the balance towards more stock markets or more fixed income is a classic in asset allocation. At the start of 2025, equities are trading at somewhat demanding multiples in many cases while debt remains pending the pace of interest rate declines. In Spain, dividends once again offer a plus higher than in other geographic areas compared to fixed income. This premium for assuming more risk is now around 170 basis points if the difference in profitability offered by the payments that the Ibex 35 companies will distribute and what can be achieved with 10-year Spanish bonds is measured. The gap is much larger when compared to 12-month Treasury Bills, with which it reaches 260 basis points (or 2.6 percentage points), the widest since October 2022.
The interest on one-year bills has fallen to around 2.2%thus providing less than half of the payments planned for 2025 in the Ibex, since The dividend yield of the index is close to 4.8%. Meanwhile, the Spanish debt for a decade is trading at 3% after the rebound seen in recent weeks, when investors have raised the yield they demand from bonds, in general, given a higher expectation of rates.
The US Federal Reserve cooled tempers at its last meeting. The American economy and inflation will allow the central bank to press the brakes on rate cuts in 2025, and the doubts are whether the European Central Bank (ECB) will maintain its faster pace, and whether fixed income will already whether or not it has discounted a good part of the reduction in the price of money.
In this context, “it seems difficult to see the IRRs [rentabilidades] of bonds moving downward, which could leave the market somewhat cold at the start of the year. Therefore, we believe that the most sensible thing is to position ourselves more prudently, especially in Europe, where we propose to concentrate exposure in companies with high visibility of cash flows, exposure to the dollar and sustainable and attractive dividends,” they consider at Bankinter. For this year in Europe, the bank focuses its strategy “on high dividend companies, such as real estate, infrastructure and utilitieswith a less cyclical profile and that they should benefit from further interest rate cuts by the ECB”.
After 2024 of stock market gains, some experts point out that some markets are trading expensive. Here the Spanish stock market would play with an advantage. “By geography, Italy and Spain stand out as markets with discounted valuation ratios compared to their 20-year averages. In this aspect, we highlight Spain, which also has prospects macro more solid than the rest of the European countries”, they assess in their outlook report in Kutxabank Investment, where they add that “analyzing the dividend yield and the stock market-bond comparison high yieldwe see that we can still see a certain margin of revaluation in the European stock market.”
Historically, companies on the Spanish stock market offer more attractive remuneration than in other European countries. In fact, the plus The profitability of dividends compared to bonds is higher in Spain than in other regions. Only Italy has a higher premium, of 183 basis points (see chart).
In the Ibex, there are several banking entities that stand out in dividend profitability. These are Banco Sabadell, which in the midst of BBVA’s takeover bid will remunerate its shareholders with payments that offer more than 9%, and CaixaBank, which rewards with a similar figure despite the rise in the stock market last year. Unicaja and BBVA are also close, with 8.75% and 8.42%, respectively. The financial sector, however, is not one of the favorite sectors for experts heading into 2025.
Among the most profitable payments for this year there are some classics. That of Enagás, which provides almost 9% after the share collapsed 22% in the last 12 months, or that of Repsol of nearly 8% after also suffering a bad year (down 12.8% in the stock market in that same period). Telefónica is also among the best dividends of 2025, with 7.63% between its two deliveries of the year.
The doubts in fixed income
For those investors who buy debt and hold it to maturity, lThe interests are now less attractive than a year ago in the case of Treasury Bills (in January 2024 they offered 3.23%), although practically the same in 10-year bonds. However, the direct purchase of debt still represents a very small part of families’ financial savings, just 1.4% according to the latest data from the Bank of Spain at the end of last June, despite the recent furor over Letras. That does not mean that Spaniards do not invest in debt. They do it through funds.
In these products there has been a large influx of money in the last year in fixed income (86% of net subscriptions were to pure debt products), where experts see active management as more key than on other occasions to achieve earnings. The reason is that volatility will be present in the face of a central bank roadmap that can change more.
Another of the keys to this 2025 that different analysis firms highlight is that, “in general, it seems that we are entering a period in which euro rates are converging, due to the different economic trends, the different capacities to manage the fiscal spending and the global geopolitical repercussions. In the future, the differentiations that markets make between central and peripheral countries may continue, but they will be less important than in previous periods,” as pointed out by Mauro Valle, head of fixed income at Generali AM.
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