Dividends: electricity, banks and commodities for 2023 – 01/22/2023 – Market

In a scenario expected for 2023 of high economic and political uncertainty, companies with a strong cash generation, low indebtedness and inserted in sectors with potential to grow despite the performance of the GDP (Gross Domestic Product) are pointed out by fund managers among those that should deliver the best yields through dividends to investors.

In 2022, the local macroeconomic environment of inflationary pressure, high interest rates and elections has already contributed to dividend-paying companies performing above the market average —while the Stock Exchange dividend index, the Idiv, rose 12.6% , the broad Ibovespa index advanced 4.7%.

According to Marcos Peixoto, manager of XP Asset, this is a natural reaction to be expected from investors. He explains that it is common that, in moments of greater risk aversion and search for protection, dividend stocks arouse greater interest, as they are well-established companies in their respective niches, with the capacity to cross better than peers. market periods of low economic growth.

The manager claims that this predilection for dividends was a movement that was accentuated in the wake of the synchronized process of interest rate hikes by global central banks —with the migration of technology companies with a high expectation of future growth, known as growth stocks in the market jargon, with the flow directed to companies that already have high profits from sectors considered more traditional, known as value.

Companies in the electric energy sector, banks and insurance companies and exporters of commodities are among those that most have the characteristics desired by dividend investors, with robust operations that translate into high recurring quarterly profits distributed to shareholders.

Variable income manager at Genial Investimentos, Roberto Lira says he expects that interest in dividend stocks will continue to rise in 2023, given the projected scenario ahead of economic slowdown and uncertainties related to the beginning of the new government in Brazil that may delay the process of falling interest rates.

“Because it is a more defensive strategy, dividend funds represent a gateway for anyone wanting to enter the variable income market”, says Lira.

Commonly present in dividend portfolios due to contracts indexed to inflation and inelastic demand, the electricity sector, through names such as Engie, CPFL, Equatorial and Eletrobras, is pointed out by Genial’s manager as one of the main bets he carries in the Plural Dividendos fund FIA (Stock Investment Fund), which rose 21.1% from January to November.

BB Seguridade, benefited by the high interest rates that make financial investments held in cash profitable and by the probable fall in the loss ratio, and the fuel distributor Vibra, positively impacted by the economic reopening, are also mentioned among the shares in the portfolio, as well as the producer of paper and cellulose Klabin and B3, the Brazilian Stock Exchange.

These are businesses that, in general, have good prospects for growth in results in the coming quarters, despite the uncertain economic picture in a broader sense, says Lira.

“We consider it very important that companies have sustainability in their dividend payment strategy, we don’t want businesses that distribute a high value in one year and drastically reduce it the next”, says the Genial manager.

Despite record dividends, managers withdraw Petrobras shares from funds

Lira says that the fund’s recent result also had an important contribution from Petrobras shares, which was among the largest distributors of dividends in the market on a global scale in recent months.

With the strong increase in shares in the year, and with the change of government and possible changes in the company’s strategic direction, the manager says he preferred to remove the oil company’s shares from the portfolio, at least until it is possible to have greater visibility on the business directions. “We don’t know what the new Petrobras will be.”

Peixoto, from XP Asset, says that he also surfed the very positive moment for receiving dividends distributed by the state-owned company, but that he disinvested from the company after the election results, with the perspective of changing the direction of the company from 2023.

“One of Petrobras’ great attractions was the dividends, and this is clearly going to end”, says Peixoto.

Despite the decision in relation to the oil company, both the manager of Plural and XP say that they maintain BB (Banco do Brasil) securities in their portfolio, based on the assessment that the financial institution, despite state control, trades at levels considered very cheap to be ignored against the last delivered results.

Still in the financial sector, Itaú and BB Seguridade are among the preferred shares in the dividend portfolio of the XP manager, with the positive impact of high interest rates on the profitability of operations.

Peixoto also says that Eletrobras is also a relevant position in the portfolio of the dividend fund, a position that has existed since before the electricity privatization process. With the privatization, the company should increase competitiveness against competitors in the market and generate growing results, says the manager of the XP Dividendos FIA fund, which accumulates appreciation of 17.6% from January to November.

Manager focuses on smaller capitalization stocks off the market’s radar

Investment director at Trígono Capital, Werner Roger says that smaller capitalization shares (mid and small caps) of commodity companies and the industrial sector are among the main positions of the dividend fund Delphos Income, which rose 15.8% in the year to the end of November.

The metallurgical companies Tupy and Ferbasa, the auto parts manufacturer Mahle Metal Leve, the petrochemical company Unipar and the agricultural storage company Kepler Weber are among the stocks that, due to their lower liquidity compared to the most traded on the Exchange (blue chips), often end up being off the radar of most of the market, but which have the potential to deliver attractive dividends in the double digits, defends the manager of Trígono.

“We look at the company’s dividend history, but what interests us most is always looking forward”, says Roger, who points to the ongoing rearrangement in global supply chains and persistently high inflation in developed countries as factors that should sustain the commodity prices at high levels in 2023.

Managers await indications from the elected government on dividend taxation

Regarding the discussions that deal with a possible taxation of dividends, now exempt for individuals, the manager of Genial states that, when the subject came up in previous governments, it was accompanied by a counterpart that was the reduction in the rates of the table IR (Income Tax) PJ (Legal Entity).

“We still don’t know how this discussion will return now in the new government, if there will be a drop in tax on companies”, says Lira.

Peixoto, from XP Asset, adds that taxation can lead to changes in companies’ business strategies to minimize the impact of the measure, such as through an increase in the repurchase of shares on the Stock Exchange or even through the anticipation of the payment of dividends.

According to him, there are already companies that are considering the possibility of anticipating dividend payments to shareholders in 2023, since the approval of such a measure in the middle of the year tends to take a few months to enter into force, possibly in early 2024. “There are still many variables at play. The taxation of dividends must come within the discussion of a broader tax framework.”

Lira adds that it is common for funds dedicated to strategy to reinvest the dividends received from companies in their own equity, and the funds have a tax rate of 15% on earned earnings. The measure, therefore, tends to have a greater impact on individuals who directly purchase shares on the Exchange than on funds, says the manager.