2024-01-31 11:24:50
It feels a bit like a reward for loyal shareholders: they receive a dividend every year. Unless you just bought a stock that doesn’t pay a dividend. But that is the minority. And so the owners can regularly look forward to a small cash bonus. Presents are not given at Christmas, but in the first months of the year.
Dirk Scherff
Editor in the “Value” department of the Frankfurter Allgemeine Sonntagszeitung.
So now. Thyssen-Krupp is kicking things off. The amount will be decided at the general meeting of the M-Dax Group next Friday, and the dividend will be paid three banking days later. The first DAX company was Siemens just under a week later. Most other DAX companies pay out in April and May, and smaller companies also pay out afterwards. This applies to German stock corporations. Foreign companies often pay their dividends twice a year or quarterly.
Half of the DAX members increased
This year, shareholders will have something to be particularly happy about. The total amount distributed will increase again, as in most years. Depending on estimates, all DAX companies will pay a huge amount of around 55 to 60 billion euros to their shareholders, a new record. Analysts expect almost half of the 40 members in the index to increase their dividends. “On the other hand, five companies are likely to reduce them,” says Frank Klumpp, analyst at Landesbank Baden-Württemberg (LBBW). They could skip five others completely, including Siemens Energy and perhaps Adidas.
This text comes from the Frankfurter Allgemeine Sonntagszeitung.
Companies pay the dividend from the previous year’s profits. “On a long-term average, around 40 percent of the surplus is passed on to the shareholders,” says Klumpp. If profits rise, dividends also grow. This year, distributions will climb between 3 and 6 percent, depending on bank estimates. This is significantly stronger than the profits, which stagnated or, at best, increased slightly in 2023. It would make sense to only allow the distributions to rise as much as the profits, to cut them if there were declines and to stop them altogether if there were losses. But companies know the importance of dividends for investor mood. If it stays the same or even falls, it can be punished with heavy price losses. Companies therefore try to raise them every year.
The dividend is no longer protected from inflation
This seems to be necessary right now because the dividend should not be consumed by inflation. After all, stocks are considered protection against inflation. In the past this was easy to do. When inflation rates were two percent or lower, distributions generally grew more strongly, at least on average. For individual stocks, however, a cut in the dividend could always eliminate protection against price increases.
And how does protection work in times of high inflation like now? The numbers show: This is currently not possible for most companies. This was still successful in 2021, even though inflation had already risen to more than three percent. But profits increased significantly due to delivery bottlenecks after the pandemic, and with them so did dividends. However, the increase in dividends could no longer compensate for the price increases in 2022, especially due to high energy and food prices.
While general prices rose by almost seven percent, dividends only rose by around four percent. The result: calculated in real terms, i.e. after deducting inflation, the distributions were reduced across the entire DAX. And the distributions this year will not be able to compensate for inflation in 2023. Prices rose by 5.9 percent last year, but dividends only grew by an estimated average of around five percent.
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