“The general rule of thumb is: company profits fluctuate less than share prices, dividends fluctuate less than company profits,” said Hans-Jörg Naumer, global head of capital markets and thematic research at Allianz Global Investors, highlighting the fact that the share prices of companies that pay dividends have also proven to be less volatile in the past than shares of companies that do not pay dividends. Photo: Allianz Global Investors

“The general rule of thumb is: company profits fluctuate less than share prices, dividends fluctuate less than company profits,” said Hans-Jörg Naumer, global head of capital markets and thematic research at Allianz Global Investors, highlighting the fact that the share prices of companies that pay dividends have also proven to be less volatile in the past than shares of companies that do not pay dividends. Photo: Allianz Global Investors

European companies are poised to deliver a record-breaking €433bn in dividend payouts in 2024, marking a 6.5% increase from the previous year, projected the latest edition of the Allianz Global Investors Dividend Study.

Allianz Global Investors expect European firms to distribute a record €433bn in dividends in 2024, a 6.5% increase from 2023, according to their dividend study on Tuesday 16 January.

This marks a continuation of the upward trend in European equity dividends, which was only briefly interrupted in 2020 due to the covid-19 pandemic. In 2023, dividends from MSCI Europe-listed companies reached €407bn, and projections suggest an increase to €460bn by 2025, representing a 13% rise from 2023.

Yields

Dividend yields in Europe are similarly on the rise. At the end of 2023, MSCI Europe companies had a yield of 3.47%, expected to increase to 3.67% in 2024. This exceeds the yield on long-term German bonds. German companies in MSCI Europe had a 3.3% yield in 2023, anticipated to rise to 3.53% in 2024. Norwegian companies lead in Europe, although their yield is expected to decrease from 7.2% in 2023 to 6.4% in 2024.

Dividends have historically been a major component of equity returns, stated the report. The study showed that over the past four decades, 36% of MSCI Europe’s annualised total equity return came from dividends, compared to 22% in North America and nearly 41% in Asia-Pacific.

Jörg de Vries-Hippen, head of investments equity Europe at Allianz Global Investors, said in the report: “The outlook also remains positive: dividend payments are expected to grow both this year and in the year ahead.”

Hans-Jörg Naumer, global head of capital markets and thematic research at Allianz Global Investors, noted that dividends significantly contribute to total equity returns and are more stable than corporate profits. He suggested that companies tend to maintain or increase dividends, even with weaker profit growth, providing portfolio stability, especially in disruptive times.

From 2019 to 2023, dividends contributed nearly half (2.51%) of the total 5.13% performance of European equities, and from 2014 to 2018, they constituted the majority (2.75%) of the 2.96% total return. Dividend-paying companies also show lower volatility than those not paying dividends, found the report.

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