Dividends Rise As Profits Drop In France's Top Index

Despite a decline in profits, CAC 40 companies are doubling down on attention to their shareholders. In 2024, they maintain record payouts, contrary to traditional economic signals. In an environment marked by sluggish growth, increased inflation, and unstable markets, this strategy raises questions. Is it a sign of strength or a risky bet? While shareholder profitability remains a priority, the gap between distributed profits and actual performance triggers doubts about the sustainability of this model.

Declining profits, but increasing redistribution

While the CAC 40 fell below 6900 points due to geopolitical tensions, the latest barometer published by EY reveals a striking contrast.

Indeed, CAC 40 companies maintained an exceptional level of redistribution to their shareholders in 2024, despite a significant decline in their results.

The combined net profit of the forty largest listed French companies fell by 12.4 % between 2023 and 2024. Yet, dividends paid reached 73 billion euros, exactly the same amount as in 2023.

This situation pushes the payout ratio to a historic peak of 54 %, up from 49 % the previous year. “Dividends help attract saver shareholders who will be there for the long term and not just to speculate,” asserts Christopher Dembik, economist at Pictet Asset Management.

This strategic choice, far from being trivial, marks a notable shift in how French companies intend to retain their capital.

Such a redistribution policy is particularly driven by certain sectors historically inclined to pay high dividends, without necessarily showing strong growth prospects. These include banks, energy, and utilities.

According to Nicolas Klapisz, partner at EY and author of the report, the rise in the payout ratio in 2024 “is mainly linked to banks that paid more dividends last year thanks to their good results.” Key features of the current French model include :

• So-called “mature” companies favoring yield over reinvestment ;
• An average dividend yield around 4 %, attractive to savers seeking stability ;
• At least 15 CAC 40 companies are now considered “yield stocks” ;
• This strategy aims to compensate for the lack of rapid valuation, unlike tech or growth stocks.

This largely assumed positioning gives the CAC 40 the image of a “safe haven” financial center, but the choice to prioritize redistribution at the expense of investment is already drawing criticism, especially in a context of accelerated innovation.

A French model going against international market logic

Unlike French companies, US companies in the S&P 500 adopt a radically different strategy. According to Goldman Sachs, the expected payout ratio for the US index will not exceed 30 % this year.

While shareholders are equally pampered across the Atlantic, it is through other mechanisms, notably stock buybacks. As Christopher Dembik points out again, “they rely more on buybacks. It is thus a different strategy, but which leads to the same result of satisfying shareholders.”

This approach has the advantage of mechanically supporting the stock price while maintaining financial flexibility, unlike dividends which directly affect reserves.

Such strategic divergence raises concerns about the medium-term competitiveness of CAC 40 companies. By favoring a rigid distribution policy amid declining profits, they expose themselves to a weakening of their investment capacity at a time when energy transition, digitization, and innovation require massive capital.

Especially since in a world where alternative yield products are booming, whether it be crypto staking, decentralized finance, or new tokenized savings products, the promise of a stable dividend is no longer enough to captivate the most dynamic investors.

The current strategy of French companies, while reassuring in the short term for traditional shareholders, could face the limits of a rapidly changing financial world. Faced with more agile international competition and the rise of alternative reward models, a redefinition of priorities will likely be necessary. The issue is no longer just to attract the classical saver but to respond to the rapidly evolving expectations of investors in a world increasingly oriented toward programmable and decentralized finance.