RIO DE JANEIRO, BRAZIL – The four major Brazilian publicly traded banks distributed R$58 (US$14.5) billion in dividends and interest on equity (IE) in 2019, according to a survey by the consultancy Economatica. The amount is close to the market value of the Natura Group (NTCO3).
In addition, it is the highest value in profits ever disclosed by financial institutions in Economatica’s entire historical series, which begins in 2008.
Itaú Unibanco (ITUB4) paid out the most dividends and IEs in 2019 at R$26.1 billion, followed by Bradesco (BBDC3; BBDC4) at R$17.7 billion. However, it was Bradesco that grew the most between 2018 and 2019, increasing its payment of dividends to shareholders by 173.8 percent.
The nominal net income of the four banks together totaled R$81.5 billion in 2019, the highest amount ever recorded historically. Itaú had an accounting profit of R$26.58 billion, while Bradesco earned R$22.58 billion in the period (also considering the accounting profit, rather than recurring). BB had a profit of R$18.16 billion while Santander had a profit of R$14.18 billion.
As the financial sector is marked by high profits and resilience to adverse macroeconomic scenarios, many investors seek bank shares to build a strategy based on collecting dividends.
However, the most common way to assess whether a company pays out good returns or not is to look at the dividend yield, determined by dividing the amount of dividends in a given period by the share price.
The yield may then be compared to rates such as the ICD (Interbank Certificate of Deposit) or the SELIC (Basic Interest Rate) for the investor to define whether it is worth keeping that paper in order to collect dividends or whether it would be better to leave the money in fixed income securities.
How to make the most of dividends
The first step is to open an account with a brokerage house accredited by the Securities and Exchange Commission (CVM). The lower the operating costs, the higher will be the profitability, so choosing brokerage houses that do not charge a fee for stock brokerage is advised.
Once the account is opened, one may simply transfer the money to be invested from one’s current account to the brokerage account and send an order to purchase the company’s shares, stating the amount of shares one wishes to buy.
Source: Infomoney