Anticipated Decrease in Dividend Distributions by DZ Bank in 2025
Catching Up with Germany's Stock Market Rally, Yet Dividend Drought on Horizon
Germany has been buzzing with an extraordinary stock market rally in 2024, with the Dax and HDax soaring roughly 20% and 19%, respectively, since the New Year. But it's a mixed bag when we focus on dividend payouts in the upcoming 2025 season.
Analysts at DZ Bank predict a decline in dividend payouts due to the tumultuous 2024 fiscal year, with estimates suggesting a drop from €63.5 billion in 2023 to €59.1 billion in 2025. Yet, dividends remain an essential ingredient in wealth amassing, with approximately two-thirds of companies expected to raise their payouts.
The expected dip of nearly 7% is primarily attributed to the struggling automotive sector, which has consistently increased dividends in recent years. In fact, DZ Bank's calculations reveal a significant growth from €39.1 billion for the 2020 fiscal year to €63.5 billion for 2023.
While the consensus forecasts a decrease of 26% to 30% in dividends from major auto manufacturers in the Dax, there's still some upside surprise potential. Notably, insurance giants Allianz AG and Munich Re — known for their consistent dividends — have maintained their payouts even amid challenging market conditions.
The delay between rising indices and increased dividend yields is nothing new. Dividends usually follow higher earnings forecasts with a time lag, so it's no wonder that the estimated Dax dividend yield hasn't caught up yet and stands at 3.1%, slightly below the long-term median of 3.3%.
Besides the automakers and suppliers, the outlook for the 2025 dividend season remains positive, with about 65% of companies expected to increase their payouts. However, the number of companies from which no dividends are expected is growing, reaching over 16%, a relatively high figure in comparison to previous years.
Delving deeper into the economic landscape, Germany's fragile recovery is marred by potential contraction later in the year due to U.S. tariffs targeting autos and industrial goods. Uncertainty around trade could push company earnings into volatility, which may in turn impact dividend sustainability.
Beyond trade concerns, the March 2025 reform of Germany’s debt brake enabled increased public spending but triggered a historic sell-off in German bonds, raising borrowing costs. Higher yields could put a strain on corporate refinancing, potentially affecting cash reserves available for shareholder returns, particularly for SMEs.
Lastly, industrial and export-driven firms face margin compression due to tariffs and supply chain adjustments. Although increased EU investor inflows gave stock prices a temporary lift[1], actual earnings growth for these sectors may fall short, compromising the longevity of their dividends.
In essence, the predicted dip in dividend payouts is a strategic move by companies to shield liquidity given heightened trade barriers, escalating debt costs, and a questionable growth trajectory[2][3].
- Despite a thriving stock market rally in Germany's HDax and Dax in 2024, analysts at DZ Bank anticipate a decline in dividend payouts from €63.5 billion in 2023 to €59.1 billion in 2025.
- Even with this anticipated drop, roughly two-thirds of companies are expected to raise their dividends in the 2025 season, with insurance giants Allianz AG and Munich Re being potential bright spots.
- Regardless, the expected Dax dividend yield of 3.1% hasn't caught up to the long-term median of 3.3%, showing a delay between rising indices and increased dividend yields.
- The outlook for the 2025 dividend season is not entirely rosy, as the number of companies expected to pay no dividends has risen to over 16%, a significant increase from previous years.
