BMW will pay out 5.5 billion euros to shareholders after boosting profits thanks to an increased stake in its Chinese joint venture as well as higher prices for its expensive premium cars.
The German automaker on Thursday proposed a dividend of €8.50 per share compared to €5.80 the previous year to allow shareholders to “participate in the success” of its preliminary 2022 results.
The move will primarily benefit siblings Stefan Quandt and Susanne Klatten, BMW heirs who own around half of the company and sit on its supervisory board.
BMW revealed last year that it had obtained permission from Beijing to increase the stake in its joint venture with Chinese partner Brilliance Auto to 75% from 50% for 3.7 billion euros.
China, with its large and rapidly growing middle class, has become the key market for German automakers, leaving them increasingly exposed to rising geopolitical tensions between the country and the West.
“For German [carmakers]China accounts for about 40% of profits – so if you’re able to take control of that business, it’s strategically important,” said Stifel analyst Daniel Schwarz.
BMW heirs Stefan Quandt and his sister Susanne Klatten own around half of the company and sit on its supervisory board © Hannes Magerstaedt/Getty Images
“Other companies would like to do the same,” he added, as permission from Beijing is required when Western companies increase their stake or take over Chinese joint ventures.
“The only thing now is that they have the biggest exposure to China, so if an investor has a negative view on China, then BMW might seem more risky.”
Schwarz added that the dividend was “high, but not a surprise” as it followed BMW guidance of a target range of 30-40% of net profit.
The increased stake, alongside higher prices for BMW’s premium cars, led to a 46.4% rise in profits last year to 23.5 billion euros. Sales increased by 12% to 279 billion euros.
Shortages of chips and other parts last year dampened car sales, leaving hundreds of thousands of near-finished cars in factories.
Automakers responded by prioritizing more expensive models with higher profit margins, leading to a bumper year for the industry.
Earnings before interest and tax at rival Mercedes-Benz jumped 28% to 20.5 billion euros last year, while Volkswagen last week announced a nearly 10% rise in profit before tax to 22 billion euros.
Schwarz suppressed a lukewarm reaction from investors due to BMW’s slight lack of consensus on its profit margin and strong numbers from Mercedes and VW, which meant some good news had already been priced in.
BMW’s share price, which has risen by almost a third over the past year, fell 1% to 99.53 euros at the close of trading in Frankfurt on Thursday.