Volkswagen’s looming dividend cut exposes sharp divide

As Volkswagen’s first dividend cut in six years looms in the wake of the diesel-emissions scandal, the car maker must balance the interests of government, labour, and family power brokers against those of investors who have felt short-changed for years.

The car maker’s two largest shareholders, the Porsche and Piech families and the state of Lower Saxony, want to protect jobs.

That interest aligns with labour leader Bernd Osterloh, who sits on Volkswagen’s supervisory board.

Holders of non-voting shares, meanwhile, have complained for years that Volkswagen’s dividend fell short of its German peers.

Last year, the company distributed 21% of profit to shareholders, less than half the average of companies on the DAX Index. One unidentified supervisory board member said it is unlikely the car maker will pay a dividend at all, newswire DPA reported this week.

Investors are expecting something, though. The car maker may slash dividends by more than half, to €2.37 per share, according to analyst estimates. That would equal about 14% of the €17.80 average estimate for adjusted earnings per share.

“They can definitely afford a payout to shareholders,” said Sascha Gommel, an analyst at Commerzbank, though it would be “reduced substantially due to costs booked toward the end of last year”.

* Bloomberg