FRANKFURT (dpa-AFX) - New cash distribution plans by Mercedes-Benz boosted the carmaker's shares on Thursday. In the morning, they were the strongest stock in the record-high Dax, gaining five percent to 71.49 euros.

Mercedes also boosted the European car sector with this price gain. In the Stoxx 600 sector overview, car stocks were in second place behind technology stocks with a plus of 2.1 percent.

Mercedes is expecting less lucrative business in the new year due to strains in the supply chain and higher investments. However, Group CEO Ola Källenius wants to keep investors happy thanks to the good cash position with a new billion-euro share buyback, the prospect of further such programs and a slightly higher dividend.

The announced share buyback program and the future dividend policy should outshine the mixed outlook for 2024, wrote analyst Patrick Hummel from the major Swiss bank UBS in an initial reaction to the plans.

In future, Mercedes intends to pay out not only around 40 percent of net profit as a dividend, as has been the case to date. If the free cash flow generated by the industrial business in a given year - i.e. excluding financial services - exceeds this, these funds are to be regularly invested in a share buyback. Philippe Houchois from Jefferies wrote that the payout policy should be seen as a sign of confidence and is in line with the positioning in the premium and luxury segment.

At a peak of 71.72 euros on Thursday, Mercedes shares rose to their highest level since the beginning of August 2023 and ignited the next stage in the price rally that has been underway since mid-January. In the past five weeks, they have risen in price by around 22 percent. Since the beginning of the year, they have gained more than 14 percent, making them one of the top stocks on the DAX./ajx/tih/stk