Mercedes-Benz’s 6.7% Dividend Yield Hides a Political Time Bomb in Washington

Mercedes-Benz shareholders are pocketing a hefty 6.7% gross dividend yield — the highest in the DAX — thanks to a €3.50 per-share payout that looks generous against a battered stock price of €52.07. But behind that fat yield lurks a legislative threat that could sever the German automaker’s access to its second-most important market. A bipartisan bill winding through Washington, the Motor Vehicle Modernization Act of 2026, would bar any auto manufacturer from importing, selling, or producing vehicles in the United States if a foreign government holds a direct or indirect stake in the company.

The danger for Mercedes-Benz stems from its shareholder register. Beijing-backed BAIC owns 9.98% of the Stuttgart-based group, while Chinese billionaire Li Shufu holds another 9.69% through his Tenaciou3 Prospect Investment vehicle — a combined Chinese presence of 19.67%. The bill sets a 15% ownership threshold for companies linked to countries the U.S. has designated as foreign adversaries. Since BAIC is a state-owned enterprise, the law would appear to capture Mercedes-Benz, though Li Shufu’s stake is private, creating ambiguity that lawyers and lobbyists are already picking apart.

Two sources familiar with the draft legislation told CNBC they believe the current wording is sufficient to land Mercedes-Benz squarely in the crosshairs. Others point to ambiguities. A former auto-policy adviser and lobbyist described the language as “unequivocal,” underscoring how little room for interpretation lawmakers may have allowed. A temporary exemption exists for manufacturers that built passenger cars in the U.S. at least five years before January 1, 2026 — Mercedes-Benz qualifies, having operated its Tuscaloosa, Alabama, plant since 1997. But that carve-out falls away if a foreign government holds any direct or indirect stake, a clause that would nullify the exemption for Mercedes-Benz.

Should investors sell immediately? Or is it worth buying Mercedes-Benz?

The potential fallout is enormous. The automaker runs two large assembly plants in the U.S., employs more than 11,000 American workers, and has produced over 4.5 million vehicles in Tuscaloosa since the facility opened. Excluding Mercedes-Benz from the U.S. market would not only trigger a political backlash but also hammer profits and jobs, warned Stephen Ezell of the Washington-based Information Technology and Innovation Foundation. He rates Mercedes-Benz a lower security risk than Chinese-controlled automakers but cautioned that sweeping language in the bill could still snag it.

The stock has already felt the political weight. On Friday, shares closed at €52.07, a 0.91% daily loss, though they managed a 4.56% weekly gain and a 6.10% bounce over the past month. That mild recovery masks a deeper wound: year-to-date the equity is still down 15.54% and trades 6.23% below its long-term moving average. The dividend yield — inflated by the depressed price — is a two-edged sword, as attractive as it is a symptom of valuation damage.

Operationally, the headwinds are plain. First-quarter 2026 revenue came in at €31.60 billion, while earnings per share fell to €1.49 from €1.74 a year earlier — not a collapse, but a clear deceleration. Despite that, the company is plowing ahead with a €2 billion share buyback program launched on November 3, 2025, and running through November 3, 2026. As of May 2026, Mercedes-Benz had repurchased about 33.9 million shares, including 3.8 million in the penultimate week of May. The buyback does nothing to mask the legal risk — but it signals management is sticking with capital-return plans for now.

The bill remains in the House of Representatives and has not yet reached the Senate. A parallel measure, the Connected Vehicle Security Act of 2026, also floating through the Senate, applies a similar 15% threshold on foreign ownership, though its specific exemptions are unclear. With Mercedes-Benz’s next quarterly earnings due in July, the legislative calendar will be the dominant driver of the share price. A softening of the ownership rules would relieve pressure on the stock. But as long as BAIC remains a shareholder, the U.S. market access — and the generous dividend that now draws income-seeking investors — hangs in the balance.

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