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Almost a quarter of European companies cut dividends

2020-04-26T03:26:34.228Z


In times of measly savings rates, dividends are a welcome bonus for investors. However, many corporations cut their profit distribution due to the corona crisis.


In times of measly savings rates, dividends are a welcome bonus for investors. However, many corporations cut their profit distribution due to the corona crisis.

Frankfurt / Main (dpa) - Tens of thousands of shareholders of European companies have to settle for significantly less dividends this year because of the Corona crisis - or go completely empty-handed.

According to an overview by DZ Bank, almost a quarter, exactly 141 of the 600 companies in the European Stoxx share index have so far announced that their profit distribution will be canceled or suspended.

"An unprecedented wave of dividend cuts is rolling across the stock markets," the analysis says. The expected distribution in the Stoxx for the 2019 financial year will fall by 23 percent to around 310 billion euros, DZ Bank expert Michael Bissinger predicts. "We expect the payouts to be reduced further in the coming months."

A 40 percent drop in dividends seems realistic. This would be comparable to the cuts for shareholders in Europe during the 2008/2009 financial crisis. "We assume that this time dividends will fall at least as much as for the financial crisis," writes Bissinger in his analysis.

The dividend is therefore disproportionately high among banks, industrial companies, in the tourism industry and in retail. Almost two thirds of the European banks in the Stoxx - 27 out of 44 - have canceled the profit distribution for the time being. The pressure on the supervisors was high here: they had asked the financial institutions to hold their money together because of the economic downturn. According to the analysis, the expected distribution volume in the health, chemical and telecommunications sectors is relatively constant.

"It is true that a reduction or cancellation of the dividend always results in a great loss of confidence," writes Bissinger. "In the current crisis, however, there is no way around securing liquidity and strengthening the balance sheet for many companies." And the outlook is also clouding over: since mid-February, dividend estimates for the current fiscal year 2020 have been reduced by 14 percent. "This reduction seems too small to us," says the study by the top cooperative institute.

The chief strategist of the private bank Merck Finck, Robert Greil, announced in mid-April his assessment that the German leading index Dax would distribute around a tenth less dividends this year than in the previous year. Greil's conclusion: "The dividends of European corporations have rushed from record to record in recent years - for many investors, dividends were a welcome source of income in times of low interest rates. But this year there is a bad awakening for some dividend hunters."

In view of the end of the dividend boom after five consecutive record years, Marc Tüngler, chief executive of the German Protection Association for Securities Ownership (DSW), appeals: "From the point of view of DSW, all companies that are not at risk due to their business model or their high level of liquidity should go through the pandemic to get into trouble stick to its dividend proposal. "

DSW announcement on dividend study 2020

Dividend study DSW 2020

Dividend studies DSW

Private bank Merck Finck on dividend season

Source: merkur

All news articles on 2020-04-26

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