DZ Bank expects lower dividend payments in 2025
Despite the weak economic performance, Germany has experienced a strong stock market rally in 2024. The Dax has gained around 20% since the beginning of the year, while the HDax, which tracks the 100 largest listed German companies, has risen by nearly 19%.
Nonetheless, analysts at DZ Bank do not expect another record year for dividend payouts in the 2025 dividend season, which reflects the 2024 fiscal year. Instead, they forecast a decline.
„Current estimates suggest 59.1 billion euros in payouts, which is considerably less than the 63.5 billion euros from last year. But dividends remain an attractive part of wealth accumulation“, comments analyst Stephen Schneider. „About two-thirds of companies are expected to increase their dividend payouts.“ The main reason for the expected decrease of nearly 7% in the total is the struggling automotive sector.
Steady rise
The expected decline in dividend payouts is noteworthy because the payouts have steadily increased in recent years. According to DZ Bank’s calculations, the HDax payout grew from 39.1 billion euros for the 2020 fiscal year to 63.5 billion euros for 2023.
The consensus, according to DZ Bank, is for dividend cuts in the range of 26% to 30% from the major auto manufacturers in the Dax. However, it is not ruled out that the estimates are distorted downwards due to the current difficult and widely discussed situation. Therefore, there could be some upside surprise potential.
The trend of top dividend payers in recent decades shows that the market is changing both by sector and region. „In recent years, insurance companies have proven to be particularly stable“, analyses Schneider. „Allianz AG and Munich Re stand out positively with their consistently paid or increasing dividends, even though they faced a challenging market environment due to low interest rates. Neither company has made dividend cuts in the past ten years, and only rarely have payouts remained unchanged compared to the previous year.“
Mostly increases
The fact that the consensus dividend estimates have lagged behind the rising indices aligns with a typical pattern. Dividends tend to follow higher earnings forecasts with a delay. Thus, it is not surprising that the estimated Dax dividend yield has not yet increased and stands at 3.1%, slightly below the long-term median of 3.3%.
Aside from the automakers and suppliers, the outlook for the upcoming dividend season remains positive: Currently, about 65% of companies are expected to increase their payouts. The consensus forecasts stable dividends for nearly 8%, and cuts are only expected for about 12% of HDax members. A downside, however, is the observation that the number of companies from which no dividends are expected is growing. At over 16%, this segment is relatively high in long-term comparison.
