The luxury sector is witnessing a dividend race

Luxury shareholders are about to reap the rewards of their investments as ex-dividend dates approach. 2024 will bring some satisfaction to European investors, with Hermès leading the pack by not only expecting an increase in their ordinary dividend from 13 to 15 euros compared to 2023 but also proposing an extraordinary dividend of 10 euros to the general assembly on April 30.

Most companies are offering higher dividends this year compared to the last, with only a few exceptions. Kering has opted to maintain its dividend at 14 euros, the same as in the previous fiscal year, to be approved by the assembly on April 25, while Salvatore Ferragamo has reduced its dividend from 0.28 to 0.10 euros, totaling 16.55 million euros. This move aims to maintain shareholder remuneration despite a decline in annual results.

«2023 saw another year of robust revenue growth in the luxury sector, except for a slowdown in the third quarter», Dario Minutella, partner at Kearney, explains to MFF. «The increase in sales was complemented by higher profits, setting the conditions for an increase in dividends for shareholders». European fashion and luxury companies have recently published their dividend proposals for 2023, which await approval at shareholders’ meetings in the second half of the month. «While these dividends are overall higher compared to last year, the growth rate remains more subdued compared to recent years. This is partly because the increase has not been uniform across all brands», Minutella explains. «Overall, the luxury sector’s dividend remains relatively low compared to share values, ranging around 1%-2%».

Some of the companies experiencing significant increases actually have dividend yields below 1%, while others facing greater challenges boast higher yields. For instance, Ermenegildo Zegna and Brunello Cucinelli have yields of 1.09% and 0.92%, respectively. Despite this, Ermenegildo Zegna, the Piedmont-based group listed on the Nyse, after announcing a doubling of net profit to 135.7 million euros in 2023 (+107.8%) last Friday, proposed raising its ordinary dividend by 20% to 0.12 euros from 0.10 euros in the previous fiscal year. Meanwhile, Brunello Cucinelli, the Company that joined the Ftse mib index of the Italian stock exchange last december, plans to propose a dividend of 0.91 euros per share for 2023 at the next shareholders’ meeting on April 23, up from 0.65 euros last year. If approved, it will be paid on May 22, with an ex-dividend date of May 20 and a record date of May 21.

On the other hand, companies undergoing a turnaround phase, such as Kering, the parent company of Gucci, Saint Laurent, and Bottega Veneta, have higher dividend yields. Kering, the group led by François-Henri Pinault, leads the sector with a yield of 3.86%. EssilorLuxottica, the eyewear giant, follows closely with a dividend of 3.95 euros per share on June 3, offering a yield of 1.94%. Prada ranks third with a yield of 1.89%, maintaining its dividend almost unchanged over the past year, proposing a final dividend of 0.137 euros per share, payable on May 17, up from 0.11 euros in the previous fiscal year. After shareholder approval at the meeting on April 24, the ex-dividend date will be April 29, with registration on May 2, 2024.

Moncler’s management has also proposed the distribution of a dividend of 1.15 euros per share for the 2023 fiscal year, totaling 310.7 million euros, with a 51% payout ratio on consolidated net income. The dividend will be detached on May 20, with payment starting on May 22. In May 2023, dividends of 1.12 euros per share were distributed, resulting in a dividend-price ratio of 1.74%. Bernard Arnault’s Lvmh conglomerate will propose a dividend of 13 euros per share on April 18, up from 12 euros last year. An interim dividend of 5.50 euros per share has already been paid on December 6, with the final dividend of 7.50 euros per share to be paid on April 25. The dividend-price ratio of Lvmh, the parent company of Louis Vuitton, Dior, and Fendi, is 1.64%, securing its position in the top 5. Finally, the beauty sector also rewards its investors, with L’Oréal announcing a dividend of 6.60 euros, with an ex-dividend date of April 26 and payment on April 30, resulting in a dividend yield of 1.6%. (All rights reserved)