European Dividends Tumble to Four-Year Low as CEOs Hoard – Bloomberg 01-16-13

Salient to Investors:

Analysts expect dividend payouts in the Euro Stoxx 50 Index will fall by 3.3 percent in 2013, cutting the dividend yield to 4.3 percent from 6.3 percent in September 2011.

John Bilton at Bank of America Merrill Lynch said within Europe, excess cash on balance sheets attracts investors – the current levels of dividend yield are not sustainable.

The median economist expects the euro-area economy to shrink 0.1 percent in 2013 versus a 0.4 percent contraction in 2012, and China to report 2012 growth of 7.7 percent, the slowest since at least 1999. Revenues for European companies will fall by 1 percent in 2013.

Abi Oladimeji at Thomas Miller Investment said slow economic growth are driving weak consumer demand, undermining corporate profitability.

Didier Duret at ABN Amro Private Banking said investors have had little choice but to buy stocks as the central banks help lower returns from other assets. Duret said dividends of quality companies offer better returns than even high-yielding corporates.

Jacob de Tusch-Lec at Artemis Investment Mgmt said European equities look like they have great dividend yields, but investors know this is not sustainable – you see cuts almost like a reset exercise. De Tusch-Lec said European stocks look cheap on a dividend yield level, but for many, we ignore the dividend yield and worry about the business model.

Read the full article at http://www.bloomberg.com/news/2013-01-16/european-dividends-tumble-to-four-year-low.html.

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