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French companies’ dividend payouts soar as jobless wait for investment rise

French Prime Minister Manuel Valls with boss of bosses Pierre Gattaz at the Medef summer shcool this week
French Prime Minister Manuel Valls with boss of bosses Pierre Gattaz at the Medef summer shcool this week Reuters/Benoit Tessier

Despite the economic crisis, the amount French companies pay out in dividends has soared to a European record, a study showed this week, raising questions about the Socialist government’s strategy of boosting company profits to create jobs.


Worldwide payouts rose 11.7 per cent year on year in the second quarter of 2014, British investment fund Henderson Global Investors (HGI) reported this week.

Dossier: Eurozone in crisis

And France led the way with a massive 30.3 per cent leap to a European record of 40.7 billion dollars (31 billion euros), compared to the US’s 89.4 billion dollars (67.8 billion euros).

Although payments by companies in recession-hit Spain rose even more – by 75 per cent – German ones only raised their payments by 3.9 per cent, despite their economy’s relative health.

Europe’s overall rise stood at 18.2 per cent.

Seven per cent of the French rise can be accounted for by fluctuations in the rate of exchange. 

But the rise in dividend payments is part of a long-term pattern – the share of dividends in French non-financial companies’ operating income has risen from 12-13 per cent in 1980 to 30 per cent today, according to a study by national statistics institute Insee at the beginning of the year.

Top payers this year have been banks and insurance companies, many of whom benefitted from state aid after the 2008 financial crisis – Axa paid out 2.04 billion euros, Crédit Agricole 0.9 billion euros, while a massive 8.9-billion-dollar (6.5-billion-euro) fine inflicted by US authorities on BNP-Paribas did not deter it from shelling out to shareholders.

Investment by French companies – not necessarily just those covered by the HGI survey - fell 0.7 per cent in the first quarter and 0.8 per cent in the second quarter.

French investment in research and development remains low compared to Germany – about 51 billion euros compared to 90 billion euros in 2012.

The findings were published as companies profited from the first seven-billion euros of the the government’s competitiveness and employment tax credit, paid for by a rise in the VAT sales tax.

That and the promised reductions in state contributions in President François Hollande’s Responsibility Pact are supposed to create jobs by encouraging investment – part of the Socialist government’s business-friendly strategy that won Prime Minister Manuel Valls a standing ovation when he addressed a gathering of the bosses’ union Medef on Wednesday.

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