Key Takeaways
- Dividend cuts are concentrated in capital-intensive sectors such as carmakers and telecoms.
- The three main warning signs for potential dividend cuts are high payout ratios, weak economic moats, and deteriorating financial health.
- A high dividend yield after a cut can sometimes reflect a collapsing share price rather than an attractive investment opportunity.
The latest earnings season has seen many large European companies raise shareholder payouts, continuing a recent trend. Still, there are several high-profile exceptions to this trend.
Resilient earnings and healthy cash flow generation have allowed many of these firms to increase income, with dividend hikes still broadly outnumbering dividend cuts among European companies.
Seven among the 100 largest stocks in the Morningstar Europe Index have cut payouts this year. Among them, automotive giant Stellantis STLAM, which will not pay an ordinary dividend this year after reporting heavy losses and substantial impairments linked to its electric vehicle strategy.
European Stocks Cutting Dividends in 2026
- Stellantis STLAM
- Volkswagen VOW3
- Mercedes-Benz MBG
- Volvo VOLV B
- Proximus PROX
- Acciona Energías Renovables ANE
- Telefónica TEF
European Carmakers, Telecoms, and Utilities Under Pressure
Volkswagen VOW3 has also confirmed a dividend cut for this year. The management board has proposed a dividend of EUR 5.20 per ordinary share that will be paid in June, down from EUR 6.30 last year. The company reduced its proposed dividend by roughly 17% following a sharp decline in earnings during 2025.
The justification for a dividend cut is similar at German peer Mercedes-Benz MBG. At its annual general meeting on April 16, the board of management proposed a dividend of EUR 3.50 per share that has already been paid on April 21, compared to a dividend of EUR 4.30 last year.
Volvo VOLV B has also reduced its total shareholder distribution from SEK 18.50 to SEK 13.00 per share paid in April, representing a decline of 30%. The overall reduction stems entirely from a lowered extraordinary dividend, which fell from SEK 10.50 to SEK 4.50 per share, while the ordinary dividend actually increased from SEK 8.00 to SEK 8.50 per share.
Belgian telecom operator Proximus PROX also announced a 50% cut to its annual dividend, reducing the payout from EUR 0.60 to EUR 0.30 per share. The company justified the move by pointing to the need to strengthen its balance sheet and finance investments in fiber deployment and technological transformation.
Spain’s Acciona Energías Renovables ANE has delivered one of the most drastic dividend cuts in Europe this year. The company announced that it would reduce its dividend by 93%, to just EUR 0.03 per share, in an effort to protect its credit rating and reduce debt after years of heavy investment spending.
Telefónica TEF also belongs on the list of major European companies cutting dividends in 2026. In November 2025, the Spanish telecom group announced that it would halve its dividend from EUR 0.30 per share to EUR 0.15 per share for the 2026 financial year, to be paid in 2027. For decades, Telefónica was almost synonymous with income investing for many Spanish investors. But the cut symbolizes how even traditional income stocks are increasingly prioritizing balance sheet strength and investment needs over maintaining high shareholder payouts.
Telefónica will still pay a total of EUR 0.30 per share during 2026, split into two EUR 0.15 payments—one already paid in December 2025 and another scheduled for June 2026—but the reduction will fully affect the dividend corresponding to 2026 earnings, which will be paid in June 2027 and amount to just EUR 0.15 per share.
Many of these dividend cuts are coming from sectors traditionally associated with high dividend yields—utilities, telecommunications and energy—precisely because these are highly capital-intensive businesses that are more vulnerable to rising debt levels and higher financing costs.
In several cases, the market has punished shareholders twice over: Not only was the dividend reduced, but the share price has also collapsed. This creates the unusual situation in which a company’s dividend yield can still appear relatively high even after a cut, simply because the stock price has fallen even more sharply.
Three Warning Signs Dividend Investors Should Watch
According to Dan Lefkovitz, strategist for Morningstar Indexes, there are three dividend cut predictors that an investor should pay attention to. The first one is the payout ratio. History shows that companies with high payout ratios have historically been more likely to cut dividends.
“The payout ratio measures the percentage of a company’s earnings that it pays out in dividends. For many equity-income investors, there’s a happy medium, where the company is generously returning cash back to shareholders, but with a cushion. Indeed, we’ve found that in recent years, companies with high payout ratios were most likely to cut their dividends.” he says.
The second dividend cut predictor is the economic moat, a durable competitive advantage that protects a company from competition.
“Wide-moat-rated companies should be able to sustain profitability better than narrow-moat companies, and both are better positioned than no-moat companies. Moats also defend dividends, according to our research. Companies with wide moats have tended to cut dividends less frequently, and no-moat companies cut dividends most frequently,” Morningstar’s Lefkovitz says.
The third dividend cut predictor is the “distance to default,” a metric that Morningstar uses to assess financial health. “It gauges the risk that the value of a company’s assets will slip below the sum of its liabilities,” according to Lefkovitz.
“Chasing high yields at the expense of overall returns can be risky; instead, long-term success in equity investing often comes from owning companies that can consistently sustain and increase their income streams over time,” he says
