Goldman Sachs Lifts Euro Stoxx 50 Dividend Forecasts on Stronger Earnings Outlook

Goldman Sachs has raised its dividend forecasts for the Euro Stoxx 50, citing a stronger earnings outlook and favorable performance in key European sectors. The investment bank's equity strategy team now projects dividends for the index will reach 194.7 in 2027 and 218.3 in 2028.

Upgraded Forecasts and Rationale

The revised forecasts represent an increase of approximately 6 index points from the bank's estimates in May. According to a note from Goldman Sachs, the upgrade is supported by a broad-based trend of rising earnings expectations across most major markets, driven by strong growth from companies benefiting from artificial intelligence-related capital expenditure.

The bank noted that since May, dividends in Europe and Japan have kept pace with their respective equity markets. In contrast, S&P 500 dividends have lagged the underlying index, which Goldman Sachs attributes to the continued leadership of technology companies, a sector that typically pays lower dividends.

European Earnings Strength

Reflecting this positive momentum, Goldman Sachs upgraded its fiscal year 2026 earnings per share (EPS) growth forecast for Europe to 15% from a previous estimate of 10%. The bank highlighted that earnings upgrades in the region have been concentrated in several key areas:

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• Energy
• Basic Materials
• Technology
• Financials

This favorable sector mix has provided strong support for Euro Stoxx 50 dividend growth, while cyclical consumer sectors have continued to lag, the bank said.

Index Changes and Market Dynamics

Goldman Sachs also noted that an upcoming rebalancing of the Euro Stoxx 50 will see Engie and Nokia replace Volkswagen and Wolters Kluwer. The bank estimates these changes will create a drag of approximately 1 index point per year relative to its previous forecasts.

From a market perspective, the bank observed that dividend risk premia have compressed and appear low compared to historical levels. It attributed this trend to favorable supply-and-demand dynamics and a year of positive earnings revisions.