Dividend payment vs Covid-19
CAC 40 companies have had to think twice before paying dividends in the turmoil of the Covid-19 crisis. Whether it is because their activity has suffered during the lockdown or because they made use of government money, a lot of CAC 40 executive boards changed their mind between March and May 2020, and reviewed the announcement made earlier in the year regarding dividend payment.
The majority of them (40%) decided to reduce the dividend to be paid in 2020, with a relative reduction between 5% and 75% of the amount. Another 40% decided to cancel the dividend payment this year.
The AFEP, a French organisation of companies in the private sector, had recommended that companies reduce their dividend by at least 20%. Actually 70% of the CAC 40 companies went much further with either a bigger drop, or even the complete cancellation of the dividend payment in 2020.
Among the 15 companies who chose cancellation, one can find the 3 CAC 40 banks, BNP Paribas, Société Générale and Crédit Agricole. This is not surprising as the European Central Bank (ECB) requested that banks do not pay dividends for the financial years 2019 and 2020 until at least 1 October 2020.
30 billion euros that CAC 40 shareholders won’t have in their hands this year
Some companies though have decided that bringing satisfaction to their shareholders was of utmost importance even in the context of the Covid crisis. They have maintained their dividend at the level initially announced. Vivendi even paid a dividend higher than last year (20% increase from 0.5 euro to 0.6 euro per share), which made the headlines.
In total that’s about 30 billion euros that CAC 40 shareholders won’t have in their hands this year, which represents roughly half of the total amount of dividends paid last year by CAC 40 companies.
One may wonder where those 30 billion euros have gone. Accor has decided to allocate 25% of the initial dividend amount, eg. 70 million euros, to the ALL Heartist Fund, a solidarity fund that financed various actions in relation with the Covid-19 pandemic. Other companies have put the money in their reserve account awaiting some better days for distribution.
Related article : Half of CAC 40 CEOs give up part of their 2020 salary