Dividend continuity

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Dividend continuity is the strategy of companies as part of their distribution policy to distribute a dividend to shareholders that is as constant as possible and independent of current fluctuations in earnings .


Factors of a company's distribution policy are the dividend yield , the absolute amount of the dividend per share, the distribution ratio (dividends paid in relation to the annual net income) and buybacks of own shares . The lower the distribution ratio, the higher the profit retention ratio . According to Prokot, dividend continuity plays a dominant role in the distribution behavior of German stock corporations, because dividends would have been much more sluggish than the profits of German companies. Such a high priority of dividend continuity is largely unknown abroad. In the US and UK in particular, quarterly dividends are just as volatile as the results on which they are based. This is mainly due to the fact that the mobilization of hidden reserves to smooth earnings is largely unknown and recourse to open reserves to stabilize the dividend is unusual.

Accounting questions

As a rule, dividend distributions should be the result of an annual surplus and reflect appropriately the earnings position of a company. As a result, fluctuating earnings also lead to fluctuating dividend payments; no dividend is paid out in years of losses. This expresses the fact that shares represent a shareholder value. Dividend continuity, however, completely disregards the current earnings position of a company and guarantees shareholders a constant, interest-like distribution, as with bonds.

If the dividend payments within the scope of dividend continuity in a financial year are above the generated annual surplus or if a loss has even been incurred, the question arises as to how the dividends to be paid out should be counter-financed. A typical case is the release of retained earnings and profit carryforwards, which must have reached a level at which the distribution block provided for in Section 150 (3) and (4) AktG does not apply. These reserves come from previous undistributed earnings. Dividend continuity therefore has the effect of attacking the substance of the company in low-income or even loss-making financial years. This in turn leads to a weakening of the creditors, because the company's equity , which is reduced by the distributions - to which reserves belong - is liable for their claims . This also applies in the event that a company even finances the dividends by borrowing on the assumption that the dividends paid can be earned in the future.


On the investor side, financial analysts or shareholders ' associations criticize dividend continuity if it does not match the company's development. This can be the case if, out of consideration for the interests of investors after a constant distribution, the dividend is reduced to an economically justifiable level much too late. Cases are also criticized in which, due to continuity with the dividend, a multiple of what the company has earned is paid out. Such a handle in the reserves is harmful for the company and ultimately not in the interests of the investors.

See also

Wiktionary: Dividende  - explanations of meanings, word origins, synonyms, translations

Individual evidence

  1. Alexander Prokot, Strategic Distribution Policy of German Stock Companies , 2006, p. 12
  2. Beiersdorf investors complain about dividend policy - boersen-zeitung.de. Retrieved February 18, 2019 .
  3. ^ Daniel Mohr: Dividend: Shareholders get less . ISSN  0174-4909 ( faz.net [accessed February 18, 2019]).
  4. Caspar Busse: A slaughter festival . In: sueddeutsche.de . 2010, ISSN  0174-4917 ( sueddeutsche.de [accessed on February 18, 2019]).