BMW's automotive segment boosted earnings before interest and tax (EBIT) as a percentage of revenue to 11.8 percent versus 8.0 percent a year before, but missed the 12.1 percent achieved by VW's premium brand.
Analysts had forecast an EBIT margin of 11.9 percent for the full year.
BMW, which is fending off efforts by Audi and Mercedes-Benz to take the premium segment's top sales spot, spent 500 million euros in the second half to introduce new versions of the 3-series sedan and 1-series compact.
The automaker expects the new models to help it beat last year's sales record of 1.67 million cars in 2012. Deliveries in 2011 rose 14 percent.
"It's the first mild disappointment in quite a few quarters," Credit Suisse analyst Arndt Ellinghorst said, citing an implied quarterly autos margin of 9.2 percent 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," he added.
Thanks to record profits, BMW will raise its cash payout to stockholders by a full euro to 2.30 euros per share, which translates to a dividend yield of about 3.3 percent.
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.
The company has long targeted achieving a sustainable EBIT margin of 8-10 percent in its cars business starting 2012.
CEO Norbert Reithofer reaffirmed in a statement today that 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.
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