Low stock market causes several assets to surpass the Selic in earnings, according to a survey

In the week ending October 30, Brazilian shares fell sharply, and the movement produced an effect that draws the attention of those who follow earnings: at the end of the period, the theoretical 12-month dividend yield for several assets was above the Selic, today at 13.75% per year. The information is contained in a survey by Elos Ayta, a financial data intelligence company, published by Money Times.

To understand the number, it is worth remembering what the theoretical dividend yield is. This is the relationship between the earnings distributed in the last twelve months and the current share price. When the price falls and payments remain the same, the ratio rises, and a paper that yielded little in earnings may start to yield more than the basic interest rate. It is this mechanism that the Money Times title suggests when talking about a falling stock market.

According to Money Times, the survey includes 19 shares present in Ibovespa, IDIV and Small Caps portfolios. There are different references: the stock market's main index, the portfolio made up of shares selected based on their dividend history and the group of smaller companies. By covering more than one section of the market, the research indicates that the phenomenon is not limited to a single range of companies.

For the reader of this newspaper, who defends fiscal responsibility and free markets, the comparison with the Selic reminds us that the basic rate functions as the opportunity cost of any investment in the country. With Selic at 13.75% per year, those who invest in variable income need a reason to accept price volatility, and the comparison of earnings is just one of the variables in this account.

There is, however, a cautious reading to be done. The theoretical dividend yield is calculated on dividends already paid, and is not a promise of future payments. A high yield may also reflect a devaluation that the market has already incorporated into the company's specific risks, something that the isolated number does not reveal. Therefore, the data serves as a starting point for the analysis, and not as a conclusion.

What changes for the investor

In practice, the survey changes the way the Stock Exchange is compared to fixed income, at least in terms of earnings. For these securities, the dividend yield exceeds the basic rate, but this does not define the total return, which also depends on price variation, investment period and each person's risk profile. The data does not allow predicting quotes and requires care not to confuse calculated income with guaranteed gain.

Automatically translated from Portuguese.