10 Best German Dividend Stocks to Buy

In this article, we will take a look at the 10 best German dividend stocks to buy.

Germany has the biggest economy in Europe as of 2022. The country is considered the powerhouse of the European economy, and following Brexit, Germany is primarily responsible for leading the European Union (EU) during these uncertain times. The highly industrialized country houses some of the leading companies like Adidas, BMW, BASF, Porsche, Puma, and SAP. The country is home to the ninth-biggest stock market in the world in terms of market capitalization. Experts think the move to increased growth momentum in key industries like automotive, chemicals, and mechanical engineering can be led by top German corporations. According to McKinsey, by 2030, widespread usage of artificial intelligence (AI) and automation will be able to add 0.4% points to Germany’s growth. German small and medium-sized enterprises (SMEs) lead the globe in producing highly specialized hardware goods. More than 90% of the top medium-sized businesses are in the hardware industry. To keep playing a crucial part in the economic system, the current pure hardware companies must now also build software and incorporate advanced technology into products.

Since 2010, the number of entrepreneurs in Germany has increased, and venture capital funding has grown tenfold over the last ten years. There are already 18 “unicorns” in the nation, which are innovative, new enterprises valued at more than $1 billion prior to going public or making an exit.

During periods of economic downturn, experts recommend investing in high dividend-yielding stocks that provide consistent cash flows and act as a hedge against inflation. Some of the leading German companies offering high dividend yields to investors include BASF SE (OTC:BASFY), Varta AG (OTC:VARTY), and Covestro AG (OTC:COVTY). Investing in German stocks would also provide shareholders with an opportunity to achieve geographic diversification. Furthermore, Guillaume Jaisson at Goldman Sachs believes that high dividend yield stocks trading in Europe are less affected by the increase in interest rates, and the regular dividend payout makes them attractive during periods of rising inflation and a challenging macroeconomic environment. Moreover, experts believe that the European Central Bank (ECB) would not be as aggressive as the US Federal Reserve in raising benchmark interest rates, providing a more conducive environment for growth to European companies.

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Our Methodology

We have discussed the analyst ratings, growth strategies, and financial strength of these companies. These companies have strong expansion plans to capitalize on emerging global trends, which is expected to further boost their margins in the long run. The stocks have been ranked according to their one-year forward dividend yield as of December 8.

Best German Dividend Stocks to Buy

10. Fresenius Medical Care AG & Co. KGaA (NYSE:FMS)

Number of Hedge Fund Holders: 13

Forward Dividend Yield: 4.33%

Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) is a Bad Homburg-based healthcare company known for creating products and services catering to the needs of patients with renal diseases.

As of 2022, Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) is meeting the needs of 344,000 patients facing renal diseases through its 4,153 dialysis clinics and is the market leader in dialysis-related products and services. There are around 3.8 million patients globally that are undergoing dialysis. Furthermore, the company has 42 production facilities spread across the world that manufacture dialysis machines and dialyzers.

In a research note issued on October 26, Tom Jones at Berenberg assigned Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) a target price of $54.39 along with a Buy rating. The target price reflects a potential upside of over 162% from the closing price as of December 8. Two shares of Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) are equivalent to one share of the company listed on the German stock exchange. In terms of valuation, experts believe Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) is one of the best German dividend stocks as the company is significantly undervalued and offers an attractive one-year forward dividend yield of 4.33%.

Here’s what Artisan Partners said about Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) in its Q3 2021 investor letter:

“Fresenius Medical Care is the world’s largest provider of kidney dialysis products and services. The company dominates the sale of equipment used in kidney dialysis and runs an effective duopoly in the provision of dialysis services in the US. COVID has had a significant negative impact on the company’s business in the form of both higher patient mortality and increased costs. And the company has made some capital allocation and operating errors that have reduced profits in what should be a growing, utility-like earnings stream. The share price fell 13% during the quarter. We are communicating with management and the board on resolving some of the company’s issues. Also, the new chairman of the company’s ultimate holding company is demanding better performance. As the demand for treatment of kidney failure remains a growing market around the globe, the company’s patient base will naturally be restored, and the equipment business will continue growing. Better execution should lead to better financial performance over the next few years.”

9. Deutsche Post AG (OTC:DPSGY)

Forward Dividend Yield: 4.62%

Deutsche Post AG (OTC:DPSGY) is a Bonn, Germany-based package delivery and supply chain management company with a global presence. The company is more widely known by its trade name of Dalsey, Hillblom, and Lynn (DHL) group. DHL is the biggest courier entity in the world.

Deutsche Post AG’s (OTC:DPSGY) CEO Frank Appel shared that 2022 has been great for the company in terms of revenue due to the rise in international business. Despite an uncertain economic environment, Deutsche Post AG (OTC:DPSGY) saw its top line increase by 20% YoY during Q3 2022. The top-line growth was driven by foreign currency tailwinds and acquisitions. Following strong Q3 2022 results, Deutsche Post AG (OTC:DPSGY) also raised its annual earnings before interest and taxes (EBIT) guidance to a record level. Furthermore, the company has enhanced shareholder value as it recently completed the first tranche of its share buyback plan and is underway with the second tranche of share repurchase that has a finishing date of Q1 2023.

8. Allianz SE (OTC:ALIZY)

Forward Dividend Yield: 5.33%

Allianz SE (OTC:ALIZY) is a Munich, Germany-based diversified financial services company with a core presence in the asset management and insurance segment. The company has a headcount of 155,000 employees that serve 126 million customers across 70 countries.

Allianz SE (OTC:ALIZY) is the biggest player in the German insurance market. The company is not only providing an attractive one-year forward dividend yield of 5.33% but also leveraging the power of share buybacks to generate healthy shareholder returns. Since 2008, Allianz SE (OTC:ALIZY) has increased its annual dividend at a compound annual growth rate (CAGR) of 9% and intends to increase its dividends by at least 5% annually in the future.

On November 14, Michael Huttner at Berenberg increased the price target on Allianz SE (OTC:ALIZY)  from $280.35 to $284.55 and maintained a Buy rating on the stock. Ten shares of Allianz SE (OTC:ALIZY) listed on the OTC market are equivalent to one share listed on the German stock market. This means that the target price assigned by Mr. Huttner provides an upside potential of over 34% from the closing price as of December 8.

7. E.ON SE (OTC:EONGY)

Forward Dividend Yield: 5.34%

E.ON SE (OTC:EONGY) is an Essen, Germany-based electric utility company that has the distinction of being one of the biggest publicly listed utility companies in the world. The company fulfills the energy needs of 51 million customers across Europe with a headcount of 72,000 employees.

E.ON SE (OTC:EONGY) has over 900,000 renewable energy plants connected to its grid, and its energy network is spread across 1.6 million kilometers. The expansive network makes E.ON SE (OTC:EONGY) a behemoth in the German transmission segment. Experts have a bullish stance on the long-term outlook of the stock as it is trading at an attractive valuation and offers an enticing one-year forward dividend yield of 5.34%.

The stock has taken a beating due to the high reliance of German utility companies on Russian gas. However, E.ON SE (OTC:EONGY) has written down its 15.5% holding in Nord Stream 1. Furthermore, the company is preparing itself for the transition towards green energy by making its operations sustainable and contributing to a zero-carbon energy world.

6. Evonik Industries AG (OTC:EVKIY)

Forward Dividend Yield: 6.29%

Evonik Industries AG (OTC:EVKIY) is an Essen, Germany-based specialty chemicals company that provides key resources as input for numerous industries.

Experts believe that Evonik Industries AG’s (OTC:EVKIY) new healthcare division will drive the top-line and bottom-line growth for the company moving forward. It must be noted that chemicals produced by Evonik Industries became part of a COVID-19 vaccine. However, as the COVID-19 pandemic is easing, the company is working on finding alternative ways to make up for the decline in sales. Furthermore, it is widely believed that the new lipid production will play an integral role in the development of mRNA medicines.

Evonik Industries AG (OTC:EVKIY) has also commenced commercial production of ceramides at its Dossenheim facility near Heidelberg. Ceramides are expected to have widespread usage in the cosmetics industry. Analysts think Evonik Industries AG (OTC:EVKIY) is one of the best German dividend stocks as its end market is still intact despite economic uncertainty. Furthermore, the company’s Nutrition and Care division is supported by higher methionine pricing.

Besides Evonik Industries AG (OTC:EVKIY), BASF SE (OTC:BASFY), Varta AG (OTC:VARTY), and Covestro AG (OTC:COVTY) are also some of the best German dividend stocks to buy.