Study on the Leading Index - Half of Dax's dividends are paid abroad
Foreign investors dominate Germany's leading stock market companies - and pocket roughly half of the dividends. In 2023, they held the majority of shares in 21 of the 40 DAX companies, according to a new study by audit and consulting firm EY. German investors, on average, held only around a third (33.6 percent) of DAX shares, while foreign investors held around half (51 percent) - the remaining shares could not be attributed.
North American investors, in particular, have significantly increased their stake in the German benchmark index - from 17.4 percent in 2010 to 23.5 percent currently. Meanwhile, the share of European investors has decreased slightly to 22.6 percent during the same period.
Only nine DAX companies had at least half of their shares held by domestic investors as of December 31, 2023, according to EY. These include Deutsche Telekom, BASF, Deutsche Bank, and BMW. However, it was noted that not all shares could be clearly attributed to domestic and foreign categories, so the figures are minimum estimates.
Only a minority of DAX dividends flow to German accounts
The strong presence of foreign shareholders also results in a significant outflow of dividends abroad. Of the 53.8 billion euros in dividends paid by DAX companies for the past fiscal year, at least 26 billion euros went to foreign investors, while 22.2 billion euros went to German investors.
Mercedes-Benz made the highest dividend payments abroad, with 3.4 billion euros going to foreign investors and 2.1 billion euros to German investors. Other large dividend payers in the DAX, such as Allianz and Siemens, also saw the majority of their dividends go to foreign investors.
More influence on companies
Henrik Ahlers, CEO of EY, sees the strong presence of foreign investors in the DAX as a "testament to the still-strong trust in the German economy." However, he also notes that the significant weight of foreign shareholders comes with increased influence on corporate decisions: "And the interests of a US-based investor can differ from those of a German shareholder," says Ahlers. This leads to corporate strategies that are more aligned with global competition and less focused on domestic concerns.
The high proportion of American investors in the DAX is not new. The capital market in Germany is considered relatively underdeveloped.
Around 12.3 million people held shares, equity funds, and/or exchange-traded index funds (ETFs) in their portfolios on average in 2023, according to the German Stock Institute. This means that only about one in six people aged 14 and over was involved in the stock market.
The stock market in question refers to the DAX, a leading German stock market with a significant influence from foreign investors. These investors, particularly North Americans, have significantly increased their stake in the DAX over the years.
The dominance of foreign shareholders in the stock market results in a substantial outflow of dividends abroad, affecting companies' strategies and corporate decisions.
