Dividends climb as companies woo investors - This is an informative article, which has appeared under more than one headline, by Christine Hauser for the NYT and IHT. Here is the opening:
Every year since 1976, McDonald's has increased its annual payout to shareholders. This year it will keep the streak alive, raising its annual dividend to $2.80. In doing so, it will join a broad range of companies that weathered a challenging economy and are now delivering their best payments to shareholders since the financial crisis.
If analysts' forecasts come true, that trend will continue later into the year, as companies release more of their cash and try to win over investors still hesitant about putting their money back into stocks.
"The idea is beginning to percolate a little bit in management suites that paying a bit higher percentage of your earnings in dividends might be a way to a higher stock price and better benefits for shareholders over all," said Edward F. Keon, portfolio manager for Quantitative Management Associates.
Companies listed in the Standard & Poor's 500-stock index paid $240.6 billion in dividends in 2011, up from $205 billion in 2010. The 2011 payout was the largest since 2008, when firms had not yet been hit by the full brunt of the financial crisis and paid a record $247.8 billion in dividends.
Dividends are on track to set a record of more than $252 billion in 2012, according to data released by S.& P. that is based on the current dividend rates of 394 companies. While there could be some changes as the reporting season begins this week, analysts said companies were expected to continue to pay shareholders, possibly at the same rates or higher, as some of the economic and fiscal headwinds from 2011 tapered off.
"Dividends have been rising strongly," said Binky Chadha, the chief strategist at Deutsche Bank. "And the rise that we have seen has plenty of upside."
Companies that pay high dividends were some of the best performers in the markets last year.
My view - Stock market performance in recent years has been dominated by the Autonomies - Fullermoney's moniker for the big, successful multinational companies which are leaders of their respective industries. Autonomies have outgrown their domestic market and are truly global companies, sourcing, producing or manufacturing in a number of countries and selling worldwide.
Most of today's Autonomies have emerged from developed economies and are thriving in this era of globalisation. The fastest growing portion of their earnings is coming from the world's Asian-led growth economies where brand names are particularly popular with the rapidly increasing middleclass.
McDonald's (monthly, weekly & daily) mentioned above is a leading Autonomy and also a Dividend Aristocrat. In a healthy sign that companies are paying more attention to their shareholders, we can expect the trend of gradually rising dividends from successful firms to increase.
Fullermoney reviews the Autonomies and Dividend Aristocrats on a frequent basis.
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Bernard Tan on China - My thanks to the author for his latest report which is posted in the Subscriber's Area.
Quote of the week - On words:
"In words are seen the state and character and disposition of the speaker."
Plutarch, philosopher (circa 46-120) (courtesy of Grayson)
Additional commentary by Eoin Treacy
Euro-Area Export Surge Adds to Signs of Stabilization - This article by Svenja O'Donnell for Bloomberg may be of interest to subscribers. Here is a section:
European exports increased in November, led by France and the Netherlands, and the monthly trade surplus swelled to the most since July 2004, adding to signs that the euro-area economy may be stabilizing.
Exports from the euro region rose a seasonally adjusted 3.9 percent from October, when they dropped 2 percent, the European Union's statistics office in Luxembourg said today. Imports were flat and the trade surplus widened to 6.1 billion euros ($7.8 billion).
European Central Bank President Mario Draghi said yesterday that the euro-area economy is showing "tentative signs of a stabilization in activity at low levels." While Draghi still warned of "substantial downside risks," the ECB voted to keep interest rates at a record low. EU President Herman Van Rompuy said on Jan 11 that the current euro exchange rate against the dollar, "is favorable for exports."
Today's data "boost hopes that net trade was positive in the fourth quarter and limits likely overall euro-zone gross domestic product contraction," Howard Archer, chief European economist at IHS Global Insight in London, said in a note to clients. Still, stagnant imports signal "weakened euro-zone domestic demand," he said.
My view - Spending cuts, slimming down the public service, higher taxes, lower wages and high unemployment among other factors have contributed to lower and, in some cases, negative growth across Europe. Short-term interest rates in the Eurozone are now at 1% and could fall further if inflationary pressures remain muted.
As mentioned in yesterday's Comment of the Day, the ECB has taken a more proactive role in managing investor expectations, 10-year - 2-year spreads have risen almost everywhere except Greece and the European equivalent of the TED spread has contracted. The crisis is not over. A satisfactory resolution will take time. However, a concerted effort appears to be underway to bolster confidence and that is to be welcomed.
The Euro's Trade Weighted Index posted a new reaction low this week, having fallen for 9 of the last 10 weeks. It is oversold relative to the 200-day MA and has paused near 120. However, today's additional weakness will need to be quickly countermanded, with an upward dynamic, to check downside scope. Potential for at least a partial unwind of the oversold condition is increasing but the Index will need to hold an upward dynamic for more than a few days and break the short-term downtrend to signal a return to demand dominance beyond the very short term.
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Eoin's personal portfolio: commodity long initiated - This section continues in the Subscriber's Area.
Weekend Reading - Thanks to a subscriber for this list of academic reports contributed in the spirit of Empowerment Through Knowledge.
Fed: "The Microstructure of the TIPS Market"
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Speaking engagements in the USA - I have accepted an invitation to speak to the Los Angeles chapter of the MTA on April 11th. The venue has yet to be confirmed but will be in the Long Beach area. Non members are welcome to attend. The topic will be "To Hoard or to Horde: risks and opportunities from participating with the crowd."
I still have some space available on my itinerary. If you would like me to speak to your local chapter or organisation in California or New York please contact your respective chairperson and ask them to contact me.
The Chart Seminar 2012 - Following a sell-out tour to Singapore and Australia last year, The Chart Seminar will be held in San Francisco, New York and London this year. Please be aware that the early booking rate for non- subscribers at the US seminars expires on January 31st.
We are currently taking bookings for our San Francisco and New York dates in April as well as London seminars in May and November. Anyone interested in securing a place at any of our events should contact Sarah Barnes at [email protected]
The date and venues for my seminars so far in 2012 are:
San Francisco - April 16th &17th 2012 Nikko Hotel
New York - April 23rd & 24th 2012 at The Manhattan Club at 800 7th Avenue
London - May 25th & 25th 2012 at the Radisson Edwardian Hampshire
London - November 22nd & 23rd 2012 at the Radisson Edwardian Hampshire
The full rate is £950 + VAT. (Please note US delegates, as non EU residents are not liable for VAT). The early booking rate of £875 for non-subscribers expires on January 30th for the US seminars. Paid-up Fullermoney subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.