Dividends that divide in times of pandemic

Audio 04:27

By: Dominique Baillard Follow

In Europe as in the United States, governments and transnational authorities urge listed companies to forgo the payment of dividends. Some groups did it spontaneously, others, the banks in particular, are still resisting.

Publicity

Each year, 1,300 billion euros are paid worldwide in the form of dividends. To reward their shareholders, companies pay them part of their profit, in principle once a year. In France, the dividend sometimes represents half of the annual profit. To retain shareholders and also to compensate employees or large families owning the flagships of the CAC 40. It is less money to invest or to make reservations in case of bad weather. With this pandemic which could plunge the whole world into a severe recession, of a duration impossible to estimate to date, it has however become urgent to keep provisions.

The groups most affected by the fall in activity therefore did not wait for the public authorities to order dividends .

This is true for the French Airbus, Auchan or JC Decaux, the champion of urban signage. In hyper-exposed sectors such as tourism, transport, aeronautics, distribution or advertising, the decision goes without saying. With exceptions that cringe: in the UK for example, Sir Stelios, the founder and one of the main shareholders of Easyjet pocketed 60 million euros in dividends without blinking, while his company is in danger and may soon need public support.

In France, Bruno Lemaire, the Minister of the Economy has been very clear: aid will be refused to companies that persist in paying dividends.

There will be no cash advance or partial unemployment for these. In the United States, Donald Trump has issued a similar decree. Very wealthy French companies, able to do without public aid, such as Total or l'Oréal, the champion of cosmetics, have decided to maintain their payments.

Luxury groups are procrastinating, either by postponing their general meetings - this is what LVMH has decided - or by reducing the dividend a little - it is Hermès' choice. The big French banks are still dragging their feet. Natixis and Société Générale finally gave in yesterday to the instructions given by the French government, by the European Central Bank and by the European Federation of Banks. While the Spanish Santander decided spontaneously. Followed by Dutch and Italian banks who did the same.

Why this French exception?

In France, banks have suffered a lot on the stock market since the start of the coronavirus crisis. Some, such as Crédit Agricole, pay half of their dividends to the regional funds, which is welcome to support the weakest funds. But this economic prudence did not withstand the examination of the situation for a long time.

Banks are now benefiting from the new generosity of the ECB, which is doing everything to ease the circulation of money. In the UK, HSBC and Standard Chartered folded yesterday after the invitation issued by the British regulator.

All these banks should especially remember 2008: in France and even more in the United Kingdom, the state saved them. A socialization of losses that citizens have never really digested. Political leaders like the ECB have not forgotten and prefer to take a date publicly. At a time when the banks are playing an essential role in supporting the companies that the coronavirus may soon make insolvent, they too must participate in the war effort.

►In short

The IMF is facing an exponential number of calls for help.

Eighty-five countries have already knocked on its door, twice as many as in the weeks following the 2008 crisis. Faced with this influx, experts are wondering about the technical capacity of the fund respond as soon as possible.

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