Key Takeaways
- The largest European companies increased their dividends by an average of 6.2% last year.
- Among the companies that increased dividends the most are banks, while the automotive sector tops the list of industries that cut payouts the most.
- European dividend stocks outperformed the wider market in 2025.
2025 was very positive for investors in European dividend stocks. The Morningstar Europe Dividend Yield Focus NR Index, which holds European companies that pay high dividends, returned 20.6% in euros. It outperformed the regional index, Morningstar Europe, which gained 19.4%, marking a sharp turnaround from the previous two years, when the regional index outperformed the dividend index.
The sectors that achieved the highest returns last year in the European market were financial services and utilities. They also had the greatest relative weight in the dividend index compared to the broader index.
Conversely, sectors that have underperformed the market average, such as healthcare and consumer cyclicals, are underweighted in the dividend index. The most overweight sector in the dividend index, consumer staples, has significantly underperformed the market in 2025, with a gain of 6.6%.
Dividend Increases Reward European Investors
Dividends paid by the largest European companies rose on the previous year. There was a 6.2% average increase in the dividends paid in 2025 by the 100 largest European companies by market capitalization, compared to 2024.
The European stocks that have increased their dividends the most in percentage terms include BNP Paribas BNP and Société Générale GLE. In 2025, French banks delivered solid profit growth. BNP Paribas reported a third-quarter net profit of about EUR 3.0 billion, up 6.1% year over year, while Société Générale posted a sharp 45% increase in nine-month net profit. Other significant increases came from British banks NatWest Group NWG and Standard Chartered STAN.
The 13 Stocks That Cut Their Dividends
Not all European dividend-paying stocks increased their payments to their shareholders last year. Of this list of 100 companies, 13 cut their dividends. Investors in Norwegian energy company Equinor EQNR, which paid NOK 32.16 in 2024, only received NOK 19.16 in 2025.
Leading German car manufacturers have also reduced their payouts to shareholders. The fall in profits suffered by these companies due to factors such as the slowdown in key markets, especially China, tariffs, and high electrification costs has put pressure on their ability to distribute dividends. Volkswagen VOW3 reduced its dividend from EUR 9.06 in 2024 to EUR 6.36 in 2025. BMW BMW also cut its dividend from EUR 6.00 in 2024 to EUR 4.30 in 2025, but the company is engaged in a major share buyback program.
Rella Suskin, equity analyst for Morningstar, says: “BMW began share buybacks in 2022, and continued them through 2024. The company is expected to sustain roughly EUR 1 billion annually without straining its balance sheet, and has authorization to repurchase up to 10% of its share capital through May 2027, with a new proposal extending a similar 10% buyback capacity to May 2030.”
