In the midst of the Covid-19 pandemic, the question of dividend payouts is being raised within companies. While Bruno Le Maire is calling for general moderation in the name of national solidarity, the major groups are seeking above all to limit the effects of the crisis on their finances.
SMEs and ETIs are not concerned
On March 24, the government announced that companies wishing to take advantage of state-guaranteed loans and the deferral of tax and social security charges would have to forego paying dividends to their shareholders. Medef is right to point out that companies experiencing cash-flow difficulties serious enough to require state aid can hardly justify paying dividends.
The French Minister of the Economy and Finance has called on other companies to "reduce dividend payments by at least one-third by 2020". However, he points out that this provision only applies to companies with over 5,000 employees and sales in excess of €1.5 billion. As a result, it does not apply to small and medium-sized businesses and mid-sized companies whose directors sometimes receive their remuneration in the form of dividends.
On the banks' side, the pressure is coming from the European Central Bank (ECB), which has asked eurozone institutions not to pay dividends until October, to freeze share buyback plans and to make no commitments for the 2019 and 2020 financial years. The aim: to absorb losses and allow individuals and businesses to borrow.
Dividend payouts: a mixed picture
Encouraged by the ECB, French banks have decided not to pay their shareholders the planned dividend. BNP Paribas recently decided to postpone the payment of 3.9 billion euros in dividends. Crédit Agricole and Société Générale have also put their shareholders on a strict diet.
Among the major groups, Engie, M6 and asset manager Amundi have announced that they will no longer be paying dividends. This is not the case, however, for Chanel, Hermès and Danone. These companies have opted not to take advantage of state aid and to pay the dividends initially planned, or to offer a reduced remuneration.
The French Association of Private Enterprises (AFEP) issued a statement reiterating its commitment to the "principle of free determination of dividends by companies". It called on its members who have recourse to short-time working to reduce their executives' remuneration by 25% during the crisis, and to cut their dividends by 20%.
So, while some companies are now forced to respond to government and regulator injunctions and cut their dividends for 2019, others are making this choice to preserve their cash flow.