European dividend payments rose in the second quarter, with banks in France and the Netherlands posting big increases. However, with a cloud hanging over Europe's still-challenged banking sector, analysts are asking whether lenders should be delivering dividends at all.
Dividends — the bit of a company's earnings they want to share with stockholders — in Europe ex-U.K. were 1.1 percent higher in the second quarter of 2016 than in the same period in 2015, at $140.2 billion on a headline basis, Henderson Global Investors said in a report on Monday. This compared to average global dividend growth of 2.3 percent.
Dividends in Europe's financial sector diverged, with French and Dutch banks delivering big increases and those in Germany, Spain and Belgium making steep cuts. French and Dutch banks helped make dividend growth in France and the Netherlands respectively second- and third-fastest in the world in the period, according to Henderson. The fastest overall was South Korea.
"The banks are boosting and the regulator has clearly approved this, but does this make sense?" Sean Corrigan, consultant at Hinde Capital, asked on CNBC on Monday.
"I mean, the one weak sector, the dragging limb in Europe, is the banking sector and the financial sector in general and the weakness that it labors under. Should they paying dividends out all? Certainly not increasing them," he added.