Why Invest In German Blue-Chip Companies

The German economy is the fifth largest in the world in terms of purchasing power parity(PPP). With a GDP of about $3.2 Trillion in 2013 based on PPP, it is also the largest economy in Europe.While the economy of the U.S. is consumption-based, Germany’s economy is export-based. Germany is a world leader in industries such as chemicals, automobiles, machinery and household equipment.

Since Germany is the economic powerhouse of Europe, investors looking invest in European companies are wise to consider German companies first. Back in October, when global equity markets turned highly volatile, Germany’s DAX index fell hard in a short period of time and reached a low of 8,354. Since then it has dramatically recovered to cross 10,000 recently and closed at 9,971 yesterday. Back in November, I wrote an article titled Keep Calm and Stay Long With German Stocks encouraging investors to not panic and dump German equities. This post follows the same theme and focuses on why investors should seriously consider investing in Germany’s DAX-listed companies.

Five reasons to invest in German blue-chip firms are listed below:

  • The 30 companies in the DAX index thrived in 2013 as they reaped business opportunities in emerging markets.
  • Turnover by DAX companies reached $1.5 Trillion in 2013, up 24% from 2008 levels according to a PriceWaterhouse Cooper study published earlier this year.
  • Revenues from foreign markets reached 855 billion Euros last year, up 33% during the same period.
  • The top firms with big rise in foreign revenues were Volkswagen followed by Daimler and BMW.
  • Overall DAX firms earned more than 90% of their total turnover in 2013 from markets outside of Germany.

Source: DAX-listed companies heavily rely on turnover abroad, Deutsche Welle

Ten DAX constituents are listed below with their current dividend yields:

1.Company: BASF SE (BASFY)
Current Dividend Yield: 4.14%

2.Company: Volkswagen AG (VLKAY)
Current Dividend Yield: 2.44%
Sector: Auto Manufacturing

3.Company: Siemens AG (SIEGY)
Current Dividend Yield: 3.52%
Sector:Industrial Conglomerates

4.Company: Henkel AG & Co (HENKY)
Current Dividend Yield: 1.68%
Sector: Household Products

5.Company: BMW AG (BAMXF)
Current Dividend Yield: 3.14%
Sector: Auto Manufacturing

6.Company: adidas AG (ADDYY)
Current Dividend Yield: 2.65%
Sector:Textiles, Apparel & Luxury Goods

7.Company: E.ON SE (EONGY)
Current Dividend Yield: 4.47%
Sector: Multi-Utilities

8.Company: Allianz SE (AZSEY)
Current Dividend Yield: 4.30%

9.Company: Deutsche Telekom AG (DTEGY)
Current Dividend Yield: 4.07%

10.Company: Linde AG (LNEGY)
Current Dividend Yield: 2.17%
Sector: Chemicals

Another simple way to invest in German blue chips is via the iShares MSCI Germany ETF(EWG). However EWG tracks the MSCI index and not the DAX index.

Note: Dividend yields noted above are as of Dec 3, 2014. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure: Long EONGY, HENKY

Leave a Reply

Your email address will not be published. Required fields are marked *