The national treasury has hit a record high for its 10-year notes. At 3.06%, this is the cheapest debt it has ever sold and a long way from incredible 7% interest rates from the end of 2011. At this point, what can investors do to find higher yielding options? Such treasures exist right here in Spain, because seven Ibex companies are paying dividends that are almost twice as high as 10-year treasury notes.
The seven companies are Santander, Mapfre, BME, Enagás, Iberdrola, Repsol and Telefónica. According to FactSet's market consensus, 2014 dividends will be equal or greater than 5%. But it should be remembered that some yields are tricky, because they are merely scrip dividends instead of traditional cash dividends. Receiving scrip dividends can dilute a shareholders stock and yield a net neutral result.
Banco Santander
Santander continues to lead the dividend crowd, as it has since 2012 when it bested former dividend champ Telefónica. In this sense, market consensus forecasts that Santander will dish out around 8.5% in dividends on 2014 earnings. Traditionally, the bank offers four dividend installments, and if that trend continues then the next payment will hit on May 2. Still, not everything is as it seems and behind the apparently high dividend lies a scrip dividend. Used since 2009, the scrip dividend strategy has allowed Santander to raise over 30% of its working capital.
Enagás
2014 could prove a record year for Enegás. The company is one step away from a buy recommendation as investors and analysts wait for it to announce a real dividend (as opposed to scrip) yielding 5.88%. If that happens, Enagás will pass BME, which has been offering the highest real dividend on the Ibex for a while. Further, investment banks forecast that the Enagás dividend should keep going up for the next several years until shareholders receive, if they buy now, a 6% yield on 2015 earnings. The company will pay its second dividend of the year on July 3 based on 2013 earnings, paying 0.76% per share.
Telefónica
The Spanish stock market had a banner year for traditional dividends, and Telefónica was one of the most profitable for investors. Just one year after cancelling its dividend policy, the telecommunications company announced in November that it would resume paying shareholders a dividend. Still, it was surprising when Telefónica announced in late February that it would keep the 0.75 euros per share dividend, but only the November payout would be in cash and the rest would be in scrip. Poor results from its heavy investments in the Latin American sector have eroded the company's earnings estimations, and it expects another 10% drop in business for this year, which means a 4-billion euro cut. Despite the disappointing news, experts predict that Telefónica's dividend will bounce back in 2016 and reach a 6.5% yield. For now, the next payout is May 7 when the company will pay 0.40 euros per share -- and this time in cash.
BME
If anyone offers secure value in their dividend , it is Bolsas y Mercados Españoles (BME). The stock market manager is offering one of the highest dividends on the Ibex for 2013 earnings even though it nixed its traditional bonus dividend. At nearly a 5.5% rate, BME is poised to pay the second-highest cash dividend on the index based on 2014. On May 9 it will pay 0.65 euros per share in its last dividend of the year. The Tobin tax and less trading activity, which the is where the tax is assessed, has not affected its profits, which are expected to rise 6% in 2014, which is 150 million euros, as a previous sell recommendation is closer and closer to flipping to a buy.
