Anticipated Reduction in Dividend Payments by DZ Bank in 2025
Rewritten Article:
In 2024, Germany's stock market is on a roll, yet the country's economic growth remains sluggish. The Dax and HDax, Germany's main stock indexes, have shot up around 20% and 19% respectively this year. However, financial analysts at DZ Bank predict a less rosy picture for the 2025 dividend season, with a projected decline in total payouts.
Analyst Stephen Schneider comments, "The current estimates suggest €59.1 billion in payouts, a drop from last year's €63.5 billion." Despite the anticipated 7% decrease, Schneider emphasizes that dividends remain an integral part of wealth accumulation, with about two-thirds of companies projected to raise their dividend payouts. The main culprit for this decline is the rough patch experienced by the automotive sector.
The decrease stands out as it contrasts with the steady increase in payouts observed in recent years. The HDax dividend payout soared from €39.1 billion in 2020 to €63.5 billion in 2023. The consensus predicts dividend cuts of 26% to 30% from major auto manufacturers in the Dax. However, there might be some positive surprises due to potential downward skewing of estimates amid the current challenging scenario.
The trend of top dividend payers in recent decades indicates a shift in the market, both by sector and region. Insurance companies have shown remarkable stability in recent years, with Allianz AG and Munich Re consistently paying or increasing dividends, despite the challenging market environment due to low interest rates. Neither company has reduced dividends in the past ten years, with only rare instances of unchanged payouts.
The expected decline in dividend payouts aligns with a typical pattern where dividends follow higher earnings forecasts with a delay. Thus, it's not shocking that the estimated Dax dividend yield has not yet increased and stands at 3.1%, slightly below the long-term median of 3.3%.
Besides automakers and suppliers, the outlook for the upcoming dividend season remains optimistic. Roughly 65% of companies are projected to raise their payouts, with nearly 8% forecast to maintain stable dividends. Cuts are expected for about 12% of HDax members. However, a downside is the rising number of companies from which no dividends are expected, currently exceeding 16%, relatively high in long-term comparison.
Trump’s tariff policy has termed the economic scene volatile, with analysts regularly revising forecasts for companies exposed to global trade. Although defensive sectors like financials and industrials have rallied on fiscal spending, broader recession risks remain. Germany's 2025 GDP growth forecasts remain weak, putting pressure on companies to conserve cash rather than increase distributions. Sector-specific pressures, such as margin compression from tariffs, also contribute to downward revisions in buyback and dividend plans. Companies often prioritize debt reduction or capital expenditure over shareholder returns amid economic headwinds, leading to a decline in dividend growth expectations.
In summary, while select companies with robust earnings (like Munich Re) are increasing their dividends, broader macroeconomic risks and sector-specific challenges are likely suppressing aggregate payout growth expectations.
- Despite the rise in Germany's stock market, financial analysts at DZ Bank predict a decline in total dividend payouts for the 2025 dividend season, with an estimated drop from €63.5 billion in 2024 to €59.1 billion.
- The automotive sector is the main culprit for the anticipated decrease in dividend payouts, as analysts predict dividend cuts of 26% to 30% from major auto manufacturers in the Dax.
- While the current estimates suggest a 7% decrease, dividends remain an integral part of wealth accumulation, with about two-thirds of companies projected to raise their dividend payouts.
- Companies often prioritize debt reduction or capital expenditure over shareholder returns amid economic headwinds, leading to a decline in dividend growth expectations, as seen in the 2025 dividend season.
