[Avis d’expert] The dividend, a brake on the development of the company or a driver of sustainable growth?

The dividend is bad! Shareholders have always been stamped with suspicion: a company that pays dividends would be a company short of investment ideas, no longer knowing what to do with its cash. Worse: the dividend would plunder the company and its employees for the benefit of its shareholders and slow down its development by promoting immediate profitability.

However, ESG fund outstandings tripled between 2018 and 2021, and the gap between flows in non-ESG and ESG funds widened considerably in favor of the latter. It makes you wonder if the advent of ESG criteria in the performance of companies would not, paradoxically, rehabilitate the payment of dividends to shareholders. Would it not be opportune, while the season of general assemblies is in full swing, to change our outlook on this method of remuneration? What if the dividend, instead of reflecting the worst of capitalism, was ultimately an essential marker of a true positive-sum growth strategy?

The dividend, an essential instrument of a long-term strategy

If Keynes said that in the long run we’re all dead, building a viable and sustainable business takes time. However, time is the enemy of profitability and the ally of risk. However, the race for short-term results encourages companies to take operational risks that undermine the quality of their service and their resilience.

Positive growth is therefore above all sustainable growth. It is resistant to crises and does not seek the lottery of surplus value at all costs. If Toyota resists better than its competitors to current tensions on supplies, it is, among other things, because the manufacturer is able to make concessions on the principle of optimization of stocks at any cost. Short-term concessions that create long-term value.

In this context, asking for a long-term investment with the risks involved, without fair remuneration for the shareholders, is quite simply to harbor illusions. However, without continuous investment, no growth, no solid company and no successful mid-sized company. In this, we certainly have a lot to learn from Germany, which, without stigmatizing the dividend, is home to a very dynamic pool of companies. Which, although they are family-friendly, are nonetheless world leaders in many sectors.

No sustainable growth without a virtuous ecosystem

Moreover, sustainable growth implies quality relationships with its ecosystem – incompatible with a cynical and short-termist approach. The example of Toyota shows it to us: the time of feudal relations between a principal and his subcontractors has reached its limits. We must invent another more responsible, more resilient model, more respectful of people and their territories.

Networks of interdependent businesses are stronger than behemoths and no business can shirk its responsibility to its suppliers and customers. At the heart of its crisis, Chantiers de l’Atlantique made it a priority to pay their suppliers ruby ​​on the nail. Because without its 4000 partners, no boat delivered and no recovery!

But building interdependent networks fundamentally takes time. And here again, the fair and regular remuneration of shareholders, through dividends, allows them to forgo this immediate enrichment and thus build a more efficient company and ecosystem. But you still have to be patient!

Building the foundations of a collective future

In the end, it is no longer possible to think of a structure out of its environment, nor to exempt it from its duty to make a positive contribution to society. Here again, the dividend plays a concrete role. If companies provide regular payments, then investor-citizens can, by financing them, build a significant portion of the compensation they will receive in retirement. On the other hand, long-term remuneration of shareholders naturally encourages them to promote a reasonable use of resources. From this perspective, the dividend is indeed the cornerstone of a common future, in which everyone finds their account.

Of course, the reality is that it is above all a tool and, like any tool, it can be used for more or less virtuous purposes. As often, everything is a matter of measure and balance. It is also necessary to promote these qualities which are not initially exciting, but without which there would be no harmonious and efficient ecosystem. Today, we win or lose together. And in this logic, properly valuing the provider of capital, offering him a sustainable vision of his remuneration is part of collective success. A vision not so amoral as it seemed at first …

Emmanuel Olivier, Managing Director of Esker

Expert opinions are published under the full responsibility of their authors and in no way commit the editorial staff of L’Usine Nouvelle.


Source: UsineNouvelle – Actualités A la une by www.usinenouvelle.com.

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