“Q4 was always going to be a transition quarter given launch costs and production changeover ahead of the new 3-Series,” wrote Marnie Cohen, analyst at S&P Equity Research, in a note.

Investors used to record profits at German luxury carmakers were not impressed by BMW’s results. Shares underperformed its peers, trading 1.4 percent higher as of 1200 GMT and lagging a 3.5 percent gain in the European automotive sector.

“It’s the first mild disappointment in quite a few quarters,” Credit Suisse analyst Arndt Ellinghorst said, citing an implied quarterly margin of 9.2 percent at BMW’s core car business versus his expectation of 9.8 percent.

“But I believe there’s been a lot of kitchen-sinking in order to keep the momentum going for 2012 and surprise the market with earnings growth,” Ellinghorst added.

With Audi and Daimler both forecasting flat profits and sinking margins for this year, the market is concerned about whether the sales bonanza driven by a growing Chinese upper class is starting to peter out.

No earnings guidance was provided by BMW on Thursday, but the company has long promised it would achieve a sustainable EBIT margin of between 8-10 percent in its cars business starting 2012.

Chief Executive Norbert Reithofer reaffirmed BMW planned to grow sales above the 1.67 million vehicles sold to customers last year.

“We expect the past year’s record-breaking sales volume performance to be surpassed in 2012,” he said.

A substantial hike in BMW’s dividend served at least as a signal that it is not all that worried about the outlook for luxury car demand.

Thanks to record 2011 profits, BMW raised its cash payout to stockholders by a full euro to 2.30 euros per share, which still translates to a dividend yield of only about 3.3 percent.   

The automobiles segment posted a 3.3 percent drop in fourth quarter earnings before interest and tax (EBIT) to 1.54 billion euros ($2 billion), slightly below a Reuters poll estimate.

A weaker than expected quarterly operating margin meant full-year EBIT as a percentage of revenue came in at 11.8 percent, shy of the 12.1 percent achieved by Volkswagen AG’s premium brand Audi last year.

BMW had estimated expenses of about 500 million euros in the second half ahead of last month’s debut of the new 3-Series, its most important model that accounts for a third of all vehicles sales at the brand.

It still finished last year ahead of Daimler AG’s Mercedes-Benz brand, which blamed heavy investments in its new line of premium compacts for its relatively low 9 percent margin in 2011.

BMW will publish its full accounts and is expected to give a forecast for earnings this year during its annual news conference on March 13.