From January to September, according to preliminary data from the Czech National Bank, 307.9 billion crowns were paid abroad in dividends and interest, which is 52.5 billion more than in the same period last year.
“The reason was primarily the higher profits of foreign-owned enterprises, which increased year-on-year by 15.1 percent, that is, by 56.7 billion crowns. However, a slightly lower rate of reinvested profits also played a role,” UniCredit Bank analyst Jiří Pour told Novinkám.
This year, the rate of reinvested profits fell from 32 percent to 28.8 percent, according to CNB data, which is still likely to be revised. However, it continued to slightly exceed the average value from the period between the financial crisis and the covid pandemic, i.e. between 2010 and 2019, when it was 25 percent.
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Made for a record
For the whole of last year, 322 billion went abroad in dividends and interest due to foreign direct investments.
“It is still true that the Czech Republic is a profitable location for foreign owners. The annual return on foreign direct investment in 2023 remained at 9.6 percent, which was lower than the average from 2010-2019, when it reached 10.3 percent, but compared to other countries in the Central and Eastern Europe region, it was an above-average value.” Pour noted.
In the ranking of these countries, however, the Czech Republic slipped from second to fourth behind Bulgaria, where the return on investment was 10.4 percent, Lithuania (10.3%) and Latvia (9.8%).
“Behind us were Romania with a yield of 9.1 and Poland with 8.7 percent. Austria yielded 6.5 percent to foreign investors, Slovakia 6.3 and Hungary 6.1 percent,” added Pour.
Dividend payments usually peak in the third quarter. For the entire year 2022, CZK 331 billion flowed abroad in dividends and interest, a year earlier the parent companies of domestic enterprises had 193 billion paid out. 2019 was a record year so far, with an outflow of capital from Czech companies to foreign concerns in the amount of 353 billion. This year may surpass it.
Dividend payouts are growing globally
According to a study by the investment company Janus Henderson, companies around the world paid out a record 1.66 trillion dollars (roughly CZK 38.2 trillion) to shareholders in dividends last year.
This is a year-on-year increase of 5.6 percent.
Technology companies Microsoft and Apple paid the most.
Janus Henderson estimated that the volume of dividends paid out will increase by another 3.9 percent worldwide this year.
Last year, the Netherlands led the countries where parent companies withdrew capital from the Czech Republic, followed by Germany, Austria, Luxembourg, Switzerland, France and Belgium.
Banks and insurance companies take the most money out of the Czech Republic, as the largest ones have owners abroad. For example, Česká spořitelna falls under the Austrian Erste group, Komerční banka under the French Société Générale, and ČSOB is owned by the Belgian KBC. Last year, domestic banks and insurance companies sent almost 85 billion crowns to their foreign mothers and over 134 billion the year before.
Billions are also paid annually to parent foreign concerns by industrial enterprises led by car manufacturers or companies operating in the field of information technology.
The CNB has not yet provided the figures for this year.
Dividends are also a political topic. “We will solve the issue of the outflow of dividends abroad with the aim of increasing the attractiveness and investment in the Czech Republic by favoring reinvestments back into the Czech economy,” the government of Petr Fiala (ODS) promised in its updated statement last March.
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Sure! Let’s dive into the article with a blend of observational humor, wit, and a little cheekiness, shall we? Here we go!
<h2>What's the Deal with Czech Dividends? A Taxing Affair!</h2>
<p>Well, well, well! It seems the Czech Republic is dishing out the cash to foreign investors like a generous uncle at a family gathering who’s had one too many pilsners. From January to September, the Czechs have sent a staggering <strong>307.9 billion crowns</strong> abroad in dividends and interest. That’s actually <strong>52.5 billion crowns</strong> more than last year! Talk about a financial glow-up!</p>
<p>But what’s behind this windfall? According to our go-to analyst, Jiří Pour from UniCredit Bank, it’s primarily because foreign-owned enterprises are raking in the profits — a delightful <strong>15.1 percent</strong> increase year-on-year. That’s like saying your nan’s secret cookie recipe has suddenly started winning baking competitions!</p>
<h3>The Peculiar Plight of Reinvested Profits</h3>
<p>However, let’s not forget about the less glamorous side of this financial fiesta. The rate of reinvested profits took a bit of a nosedive, falling from <strong>32 percent</strong> to <strong>28.8 percent</strong>. It’s like when your friend insists on “reinvesting” in their Netflix subscription instead of taking you out for dinner — disappointing, isn’t it?</p>
<h3>Winners and Losers in the Investment Stakes</h3>
<p>Now, if we look a bit deeper into the crystal ball of foreign direct investments, last year saw an impressive <strong>322 billion crowns</strong> leave the country. But let’s be real: the Czech Republic may be a decent place to invest, but it’s clutching at straws, slipping from second to fourth in the investment ranking among Central and Eastern European countries. Bulgaria has taken the crown (or should we say crown jewels?) with a return on investment of <strong>10.4 percent</strong>. Talk about a plot twist!</p>
<p>To put it bluntly, we’re trailing behind Bulgaria, Lithuania, and Latvia now. I guess it’s safe to say we’ve got some catching up to do — or at least find a better cocktail sauce for our economic prawns!</p>
<h3>The Global Dividend Party!</h3>
<p>Meanwhile, in the wider world, the dividend game is booming, folks! A recent study showed that global payouts hit a record <strong>1.66 trillion dollars</strong> last year. That’s like winning a lottery and then deciding to spend it all on vintage comic book collections. </p>
<p>Companies such as Microsoft and Apple are leading the pack in dividend payouts, showing once again that tech giants have more cash than even your Instagram influencer friend who seemingly makes money through sheer willpower.</p>
<h3>But Wait – What's Cooking on the Political Stove?</h3>
<p>Apart from the spreadsheet shenanigans, dividends are also a hot political topic in the Czech Republic. The government is promising to cook up something to address the outflow of these dividends. They’re talking about favouring reinvestments back into the economy, which sounds great unless it means more meetings and endless paperwork — the economy's version of watching paint dry!</p>
<h3>Conclusion: Keep an Eye on Your Wallet!</h3>
<p>So, what’s the takeaway from this Czech dividend escapade? Well, it seems we’re all in for a rollercoaster ride of investments and outflows! Whether it’s high profits or a sudden dip in reinvestments, one thing’s for sure: when it comes to dividends, the game’s on. Just remember, if you find yourself at a family function and someone tries to hand you a dividend, you might just want to check they’re not expecting a bigger return from your wallet instead!</p>This rendition maintains a conversational and observational tone, flavored with a sprinkle of cheeky humor while unpacking some of the more serious economic insights. Hope you enjoyed it!
Between January and September, preliminary data from the Czech National Bank indicates that a staggering 307.9 billion crowns were remitted abroad in the form of dividends and interest. This figure marks an increase of 52.5 billion crowns compared to the same timeframe last year, highlighting a significant capital outflow.
“The surge in outflows is primarily attributed to the robust profits reported by foreign-owned enterprises, which saw a year-on-year increase of 15.1 percent, translating to an additional 56.7 billion crowns. However, a slightly diminished rate of reinvested profits has also contributed to this trend,” commented Jiří Pour, an analyst at UniCredit Bank, in an interview with Novinkám.
According to the CNB data, the reinvested profits rate this year dropped from 32 percent to 28.8 percent. While these figures may still be subject to revision, it still remains above the average rate recorded between the financial crisis and the onset of the COVID-19 pandemic, which stood at 25 percent from 2010 to 2019.
For the entirety of last year, a total of 322 billion crowns was transferred abroad in dividends and interest, primarily linked to foreign direct investments, underscoring the continued financial relationship between Czech companies and foreign stakeholders.
Despite a marginal decline, the Czech Republic maintains its appeal as a lucrative hub for foreign investors. The annual return on foreign direct investment in 2023 held steady at 9.6 percent—while slightly below the 10.3 percent average from 2010-2019, it remains significantly higher than many other countries in the Central and Eastern European region.
However, the Czech Republic has dropped from the second to the fourth position in terms of investment returns among Central and Eastern European countries. Bulgaria leads with a return of 10.4 percent, closely followed by Lithuania at 10.3 percent and Latvia at 9.8 percent. In contrast, Romania and Poland lag behind with yields of 9.1 and 8.7 percent, respectively, while Austria, Slovakia, and Hungary reported significantly lower returns of 6.5, 6.3, and 6.1 percent.
Typically, dividend payments peak during the third quarter. In 2022, a total of 331 billion crowns was dispatched abroad in dividends and interest, compared to only 193 billion in 2021. The year 2019 still holds the record for the highest outflow, with 353 billion crowns being transferred to foreign entities—this year’s figures suggest that this record may well be surpassed.
According to a study conducted by investment firm Janus Henderson, companies globally disbursed an unprecedented 1.66 trillion dollars (approximately CZK 38.2 trillion) in dividends in the previous year, signifying a year-on-year increase of 5.6 percent.
Janus Henderson forecasts a further worldwide increase in dividend payouts by 3.9 percent for this year, reflecting growing confidence among corporations to reward shareholders despite economic uncertainties.
Last year, the Netherlands topped the chart as the primary source of capital withdrawal from the Czech Republic, followed closely by Germany, Austria, Luxembourg, Switzerland, France, and Belgium. This indicates a robust network of foreign interest in Czech investments.
The banking and insurance sectors were highlighted as major contributors to capital outflows, with prominent institutions having foreign ownership. For instance, Česká spořitelna is under the Austrian Erste group, Komerční banka is a subsidiary of the French Société Générale, and ČSOB is owned by the Belgian KBC. Last year alone, domestic banks and insurance firms transferred nearly 85 billion crowns to their foreign parents, a substantial sum that was even higher the previous year at over 134 billion crowns.
The outflow of funds is also notable from industrial companies, particularly automobile manufacturers and firms in the information technology sector, which regularly remit significant dividends to their overseas parent companies.
The figures for this year have not yet been released by the CNB, leaving analysts and stakeholders in anticipation of the latest data. In a broader context, dividends remain a pivotal political topic. “We intend to tackle the issue of dividend outflows with strategies designed to enhance the Czech Republic’s attractiveness for investment, ultimately supporting reinvestment within our domestic economy,” stated the government of Petr Fiala (ODS) in an updated manifesto released last March.
How can the Czech government effectively balance foreign dividend outflows with the need for local economic growth amidst rising corporate dividends?
E increase in dividend payouts in the coming years, which could mean more cash flowing from companies to their shareholders. Companies like Microsoft and Apple continue to lead the charge, showering their investors with dividends like they’re hosting an opulent gift-giving party.
In the midst of this economic buzz, the Czech government is trying to step up its game to ensure that the local economy benefits from these financial movements. With political promises afoot to tackle the outflow of dividends and foster reinvestment into the domestic economy, it seems that both the government and investors have plenty to chew on. However, one can’t help but roll their eyes at the red tape that often accompanies such measures—it’s like preparing a feast only to serve it with a side of bureaucratic soup.
as dividends make headlines both domestically and internationally, the Czech Republic finds itself at a crossroads—balancing the needs of foreign investors with the imperative to reinvest in its own economy. So while you’re keeping an eye on your wallet amid this financial whirlwind, just remember: the more things change, the more they stay the same—especially when it comes to government promises and the ever-elusive art of reinvesting profits.
