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Vonovia vs. BASF: And suddenly a change of favorites?

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Investment Ideas and Stock Tips

Vonovia (WKN: A1ML7J) and BASF (WKN: BASF11) are two DAX stocks that I recently took a closer look at in comparison. My conclusion at the time was that both dividend stocks have historically strong payouts. But that he would prefer to favor the residential real estate group over the cyclical chemical group due to the more defensive business model.

Of course there was a difference in quantity. BASF shares had and still have a dividend yield of over 6%. Vonovia does not even reach 4%. That means there’s a lot in between.

Still, sustained payouts are something that income investors favor. Time to think about swapping favorites for these two DAX stocks. Sustainable distributions are now only available for one of these two actions.

Vonovia vs. BASF: Hence the change of favorites

Between Vonovia and BASF, it actually had the biggest promise of sustainable distributions in the DAX residential real estate group. Also regarding history, which has been characterized by moderate growth, I expected more. More quality, less quantity seemed to be the deal.

Because the management of the residential real estate group does not even want to cut its own dividend by 2%, a lot disappears: history, a bit of investor confidence in an always sustainable dividend. On the contrary, BASF’s management demonstrates that a constantly stable dividend has a high priority. Even when the operating business fell into the red, the management paid a stable distribution to investors.

Due to the cutbacks at Vonovia, we still have a defensive business model, so far very good. However, that doesn’t always provide stability when it comes to dividends. In essence, therefore, I would prefer to increase my participation in BASF shares with a dividend yield of more than 6% as a dividend hunter. Even if the operating business is not as defensive and more cyclical: in case of doubt, the chemical company would recover qualitatively with a cut. Except that even then, the dividend yield would likely be even higher.

there is a difference in quality

There are quite a few quality differences between BASF and Vonovia. The residential real estate sector can hardly be compared to a chemical company. But there is also a very clear trend when it comes to dividends: a chemical company that is really trying to provide sustainable and reliable payouts for investors, and a residential real estate company that is now unceremoniously reducing its dividend per share in only 2%.

Of course, there is no need to make a fool of the mosquito, especially since a 2% reduction is anything but significant. However, if I wanted to invest in a high and stable level of passive income, I would now prefer to consider increasing my share in the chemical company.

The article Vonovia vs. BASF: And suddenly a change of favorites? first appeared in The Motley Fool Germany.

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Vincent owns shares in BASF and Vonovia. The Motley Fool does not own any of the shares mentioned.

Motley Fool Germany 2022

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