Economy

Why dividends should be paid in the crisis – and why not

At least here harmoniously: Bavaria’s Prime Minister Söder with BMW boss Oliver Zipse. BMW also wants to pay dividends despite government aid – and receives criticism

It does not go together that companies receive state aid and at the same time pay dividends to their shareholders. This is a common criticism.

“It would be a kind of subsidy for the shareholders of this company, which is paid for by all citizens,” says Tomaso Duso from the German Institute for Economic Research to NewsABC.net.

On the other hand, institutional investors depend on a certain degree of planning security – and missing dividends could fall back on citizens, writes the Vienna Stock Exchange, for example.

Sahra Wagenknecht of the Left is not the only one who advocates that companies should not pay dividends to their shareholders when they claim Corona help or send employees on short-time work.

The European Central Bank also expects European banks, at least, to suspend dividend payments and instead keep the money available to help them cope better with the crisis or to keep the real economy going by continuing to lend. Distributing “lavish dividends” and calling for the state simply don’t match, says Marc Tüngler, managing director of the German Protection Agency for Securities Ownership of the German Press Agency.

“It would be a kind of subsidy for shareholders”

“A company should not pay dividends if it has received some form of money from the state,” says Tomaso Duso, head of the company and markets department at the German Institute for Economic Research on NewsABC.net. “It would be a kind of subsidy for the shareholders of this company, which is paid for by all citizens. State aid should ultimately ensure the necessary liquidity to survive the crisis. ”

Instead, he explains that politics should send a clear signal. If a company has received government aid, it cannot pay dividends. The same applies to bonuses, unless it has paid back at least 75 percent of the fiscal support.

But while companies with KfW credit withdrawals like Adidas and Lufthansa follow these demands – after all, the federal government has prohibited dividend payments – corporations like Daimler, Volkswagen, BMW or BASF distribute the annual payments to their shareholders; even though part of their workforce is on short-time work.

Failure to pay could also harm citizens

With all the criticism of this process, there are arguments in favor of a distribution. According to the Vienna Stock Exchange, it could even have a negative impact on citizens if large companies do not pay. The reason lies in the investment of institutional investors. These include health and pension funds, or pension funds, insurance companies, churches, associations, foundations, asset management companies and government organizations. At Daimler alone, 52 percent of the shares are held by such institutional investors.

“Bad awakening” for shareholders: Almost a quarter of the European groups cut the dividend – four sectors in particular are affected

“A certain degree of planning security is important for institutional investors such as pension funds,” says Gerrit Fey, head of the digital markets department at the German Stock Institute. After all, their customers must also be able to rely on receiving the contributions at a certain point in time. It is possible that such investors jump off if there are no payments, Duso also says. However, this is not particularly likely, since the corona crisis affects almost every company.

The state loses revenue

In addition, 26.375 percent tax – 25 percent from capital gains tax plus 5.5 percent solidarity surcharge on this share – is paid on investment income. In 2019, the federal government received around 5.15 billion euros from this flat tax, of which dividend payments include interest on savings and fixed-income securities, profits from the sale of private investments and income from shares in investment funds. The state is currently unable to use the lost income and income from dividends from retail investors could in turn flow into the economic cycle. This explains the Vienna Stock Exchange.

It also amounts to expropriation if the profits generated in 2019 do not reach investors, it says.

But the stock exchange also says: Whether a company should pay dividends has to be decided on a case-by-case basis. Tomaso Duso adds: “Of course, companies that have not received state aid should be able to decide for themselves how to use their profits – that is, whether they make reserves or pay dividends. Companies that have benefited from the crisis, for example, could also make themselves more attractive to investors. ”

That’s how a 19-year-old lives who made millions with stock trading

That’s how a 19-year-old lives who made millions with stock trading

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