Dividend Swap Monitor European dividends supported by strong earnings but upside increasingly limited

Portfolio Strategy Research 16 September 2026 | 5:02AM BST

European dividends supported by strong earnings but upside increasingly limited

n Dividends continued to perform well since our last dividend swap monitor in Christian Mueller-Glissmann, CFA May (Exhibit 1). Only S&P 500 dividends lagged their underlying equity index - | christian.mueller- European and Japanese dividends have broadly kept up with equities (Exhibit 2). Goldman Sachs International

As a result S&P 500 implied dividend yields declined further relative to other Alessandro Giglio | regions (Exhibit 3). This partly reflects the continued Tech leadership in equities Goldman Sachs International and earnings revisions YTD, which tend to pay lower dividends. However, that Andrea Ferrario might also make S&P 500 dividends more resilient during market drawdowns. | Goldman Sachs International n The earnings backdrop has been supportive, although revisions remain Elena Porfidia concentrated in a few sectors. Earnings expectations have trended higher | across most major markets, led by the US and North Asia due to strong earnings Goldman Sachs International

growth from AI capex beneficiaries such as semiconductor companies (Exhibit 4). Peter Oppenheimer | In Europe, our equity strategy team upgraded their FY 2026 EPS growth to 15% Goldman Sachs International (from 10%). Within Europe, earnings upgrades have been concentrated in Energy, Basic Materials, Technology and Financials (Exhibit 5), while more cyclical consumer sectors continue to lag. With a favorable sector mix EURO STOXX 50 and FTSE 100 dividends have generally been supported by the stronger earnings backdrop. n We raise our bottom-up EURO STOXX 50 forecasts to 194.7 for 2027, and to 218.3 for 2028 - approximately 6 index points above the May estimates. However, following continued strong performance of implied dividends since May, upside to our forecasts has compressed materially, particularly at the front-end of the curve. The EURO STOXX 50 index in September is having a 2-for-2 reshuffle, with Engie and Nokia replacing Volkswagen and Wolters Kluwer, with approximately 1 index point drag p.a. relative to our previous forecasts due to rebalancing, whereas STOXX 600 Banks will have four new entries with no exits. n Dividend risk premia (DRP) have compressed and appear low compared to history and credit spreads (Exhibit 6). This in part reflects more favorable supply/demand technicals but also the fact that with positive earnings revisions over the past 12 months, long-dividend positions have been like a call option - this is a large difference to the post GFC cycle when negative earnings revisions meant long dividend positions were more like a ‘short put’. However, tailwinds from earnings growth and revisions are likely to moderate while near-term risks have picked up - rising equity volatility might start to weigh more on dividends.

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Goldman Sachs Dividend Swap Monitor

n European front-end dividends have had a higher beta to equities recently. The beta of 1-year forward EURO STOXX 50 dividends has rebounded from the low levels reached earlier in 2026, while betas for longer-dated dividends have been stable, in part due to easing dividend supply concerns (Exhibit 7). Near-term equity volatility could rise amid higher rates volatility, seasonal weakness and fading support from the earnings season, the approaching US midterm elections and broader geopolitical risks, including the ongoing Middle East conflict, the Russia/Ukraine war and elevated US/Canada trade tensions. Additional headwinds in Europe include higher TTF gas prices and political risks. European dividends have also shown little response to the widening in French sovereign spreads (Exhibit 8), despite the meaningful weight of some constituents (BNP Paribas, Sanofi, AXA). This supports dividend call-overwriting strategies and a more selective approach in sectors as well as equity replacement opportunities with longer-dated dividends, which might be more…