Dividends: Part Finance, Part Psychology

If a company values the ability to distribute dividends, it should consider several factors that go beyond the financial aspect. Psychological behavior also plays a role, which tends to take on greater importance when establishing a proper dividend policy. If a company is profitable, has cash and does not know how to invest it for a return, that money should be given back to shareholders. This is a basic principle from a financial point of view. But these rules generally don’t apply, since other aspects related to human behavior come into play. Thus, the question arises whether it is a financial or psychological matter… and the latter, as it turns out, has a considerable influence. Dividends must be maintained Shareholders get used to dividends once they start rolling in, so they must continue to be paid out over the course of time. Indeed, determining a proper dividend policy requires more than looking at profitability or the amount of cash the company is generating. The company must also consider its ability to sustain the dividends in the future. It may seem like the most obvious practice would be to explain to shareholders every year whether the company was profitable enough and determine the dividend based on performance. However, that is not the case, since the information available to shareholders is inconsistent. Those who have received dividends expect to get at least the same amount in the future unless it is well justified that the company needs cash. All we have to do is look at the behavior of large companies, which predominantly define their dividend policy as a fixed amount per share,...

Mercedes-Benz chief Gary Savage: ‘Prepare for direct sales’

Mercedes-Benz franchisees have been challenged to think hard about their business opportunities when manufacturer direct sales take off. UK chief executive Gary Savage believes it is “an inevitability” that carmakers’ national sales companies will take on direct sales of new cars to consumers in the future, but he is convinced it is not a threat to dealers. “In reality, to genuinely be able to realise online selling, you have to do it direct. Because of all the components of competition law, you have to be in a position where you can set the selling price, in order to offer the customer the best price consistently,” he said. As such, direct sales couldn’t happen overnight, but he was unwilling to suggest a timeframe for the development. Full...

Amazon ‘recruiting car sales executives’ ahead of UK pilot scheme

Amazon could be set to pilot online car sales in the UK after its UK sector boss admitted car sales executives were already being recruited in preparation for the scheme. E-commerce delivery expert ParcelHero issued a warning to UK car retailers after producing a report into the strategy of the burgeoning online retailer which highlighted its future role in the business of selling cars. ParcelHero’s head of consumer research, David Jinks, said: “From books to consumer electronics, Amazon has completely transformed the market wherever and whatever it has launched. “Now the likes of Evans Halshaw and Bristol Street Motors will be taking a deep breath as it accelerates into the world of car sales.” Full...

Online car sales could spark 27,000 dealership jobs losses within a decade

Car dealers are being urged to move with the time in a bid to avoid a predicted trend which could see online car sales lead to the loss of 27,000 automotive sales jobs by 2027. Research from online review community Trustpilot and the Centre for Economics and Business (Cebr) reveals motorists looking for a new car will become increasingly likely to buy online, rather than from a dealership, with around 20% set to be sold online within a decade. Trustpilot warned that traditional salespeople could take a back seat as tech-savvy consumers become more comfortable making purchases of new and used cars online. The new research uses consumer survey data to predict that car dealers could see more than £41 billion revenue and 27,000 jobs disappear if they fail to adapt to the new sales environment, with nearly £1.5bn worth of sales moving online by 2020. Trustpilot’s UK managing director, James Westlake said “Competition will be stiffer than ever, as dealers will be forced to compete across both traditional and digital sales channels. “The key to winning this race is not just on price, but by generating consumer trust and confidence to buy a car through their platform.” Dealerships are being encouraged to adapt their current business model to meet changing consumer behaviours.   Full...

Dividendos: una cuestión financiera y psicológica

Ignacio Magro, profesor de IE y socio fundador de Finae Partners Si una compañía valora la posibilidad de repartir dividendos, debe tener en cuenta varios factores que no son solo financieros. También influyen comportamientos psicológicos que en muchas ocasiones pesan más a la hora de establecer una correcta política de dividendos. Si una empresa genera beneficios, cuenta con liquidez y no sabe cómo invertirlo de forma rentable, ese dinero debería volver a los accionistas. Se trata de un principio básico desde el punto de vista financiero, pero estas reglas no aplican en la mayoría de los casos ya que entran en juego otros aspectos que tienen que ver con el comportamiento humano. De modo, que surge la cuestión de si se trata de un asunto financiero o psicológico, y esto último tiene una gran influencia. Los dividendos hay que mantenerlos Los accionistas se acostumbran a los dividendos una vez que empiezan a cobrarlos, de modo que hay que mantenerlos en el tiempo. Entonces, para definir una correcta política de dividendos no es suficiente con observar los beneficios o la caja que esté generando la compañía, sino que hay que considerar la capacidad de la compañía de mantener esos dividendos a futuro. Parecería que lo más obvio es explicar a los accionistas cada año si la compañía ha generado suficiente dinero y así definir el dividendo en función a los resultados del año, pero la realidad no es así ya que siempre existe asimetría de información entre los accionistas. El accionista que ha recibido dividendos espera recibir al menos esa cantidad a futuro a no ser que se justifique muy...

VW Group’s retail company to sell 275 dealerships

Volkswagen Group’s retail chain, Porsche Holding Salzburg, one of Europe’s biggest dealer groups, is selling 275 sales locations to Emil Frey Group to concentrate on selling cars only from VW Group’s 12 brands. The acquisition will likely move Emil Frey into the top spot among Europe’s independent groups. Last year the Swiss group was No. 3 behind Penske Automotive at No. 1 and Pendragon at No. 2, according to the 2016 Guide to Europe’s Biggest Dealer Groups compiled by automotive distribution researchers ICDP for Automotive News Europe. The dealerships to be sold are run by Porsche Holding Salzburg’s subsidiary PGA Motors. France has 207 of the affected locations, while the Netherlands has 50, Poland 12 and Belgium six. Porsche Holding Salzburg plans to consolidate its French dealerships carrying VW Group brands into a newly formed subsidiary called Volkswagen Group Retail France (VGRF) starting in July. “Porsche Holding Salzburg would like to further develop its sales activities in France,” CEO Alain Favey said in a statement. “We want to consolidate the 19 dealerships that so far have been part of Volkswagen Group France with 44 retail locations from PGA Motors.”  ...