Thursday, January 10, 2019

CAC 40 dividends return to pre-crisis

The 40 largest French companies paid 57.4 billion euros to their shareholders in 2018, in the form of dividends or share buybacks. This increase of nearly 13% compared to the previous year reflects the good health of these companies.

► How have the dividends of CAC 40 companies evolved?

Dividends and share buybacks among CAC 40 companies increased by 13% in 2018. This is what the authors of the Lettre, Pascal Quiry and Yann Le Fur, reveal in their 16e annual study published on January 8th.

A total of € 57.4 billion was redistributed to shareholders, including € 10.9 billion in the form of share buybacks. "This level comparable to that of 2007 (57 billion euros) found eleven years later by the stars of the French economy is not surprising given their very good results at this point in the cycle", says the study.

"It's a sign of good health of the 40 best companies in France", rejoices Pascal Quiry, professor at HEC. These performances show that the crisis of 2008 is now behind the CAC 40, since the redistribution to shareholders has increased by 62% compared to 2009. "The best have still taken eleven years to return to the same level as in 2007, which gives an idea of ​​the severity of the shock", he emphasizes.

All CAC 40 companies are not equal. The first three groups (Total, Sanofi and BNP Paribas) alone represent a third (33%) of the volume of shareholders' equity redistributed to shareholders. "If these three groups were doing very badly, it would have an impact on the entire CAC 40", recognizes Pascal Quiry.

► Do dividends increase more than business profits?

Dividends rose less (+ 4.7%) than the net results of the CAC 40 (+ 18%). "It's good management, says Pascal Quiry. Systematically in well-managed companies, when profits increase, dividends increase less quickly. Similarly, they decline less quickly when profits fall. " This faster earnings growth than dividends results in a lower distribution rate.

CAC 40: the profit sharing debate is still a recipe

The study on the distribution of companies to their shareholders in 2018 compared to the results of 2017, this allows to anticipate the trend for the year 2019. "The results of the year 2018 will be given in about a month, but we already know those of the first three quarters, explains the author of the letter specialized in finance. They are good, so in all likelihood there should be a small increase in dividends next year and probably share buybacks next year. "

► Does higher dividends lead to lower investments?

It is often understood that if companies pay less dividends to their shareholders, it will allow them to invest more. The studies of the Letter wring the neck to this affirmation. "It is a sophism, that is to say a false reasoning that has the appearance of the real"explained the two authors in one of their letters published in October 2017. "We realize that the more groups invest, the more they pay dividends and vice versa," supports Pascal Quiry.

For this, the HEC professor relies on a study conducted with his colleague on the CAC 40 groups between 2005 and 2016. "We found that the group that had the most increased its investments was the one that had increased its dividends the most: Safran, says he. Both are not antinomic. "

The letter ensures that "No group has had to reduce its investments or go beyond the reasonable level to pay a dividend". Some, on the other hand, reduced their investments when their sector was bad.

Clément Grillet


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