11-Jan-2012 - Rising Dividends Expected in 2012 as Companies Woo Investors
Visted 7 timesIf 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 custom nhl jerseys & 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. Telecommunications, utilities and health care shares had the highest yield rates at the end of 2011, at 5.86, 4.13 and 3 percent, respectively. McDonald’s had double-digit percentage stock returns, at more than 30 percent, and dividend yields that exceeded the S.& P. index. Other companies with similar performance included Bristol-Meyers, Consolidated Edison and Home Depot. The dividend yield is the amount paid per share as a percentage NFL jerseys of the stock price. In McDonald’s case, that equals 2.8 percent, or 2.80 for each share, which are now trading at 99.70. Even dividends from financial companies were higher in 2011 than in previous years. Because of the federal bailouts in 2008, banks need federal approval before they can increase dividends, but investors can still expect improving payouts. Dividends in the financial sector of the S.& P. index rose to 28.5 billion last year, up from 18.6 billion in 2010. The 2011 payout was still far lower than the 50.7 billion in 2008. JPMorgan Chase’s dividend for 2011 was 1 a share, up from its previous annual dividend rate of 20 cents, but in contrast to 1.52 before the crisis. Citigroup went to 4 cents a share last year after not paying a dividend in 2010. “Down the road, the financials clearly would like to bring back those long-term investors,” said Quincy Krosby, a market strategist for Prudential Financial. “Clearly their goal is to become an investment vehicle as they were in the precrisis period.” American companies and investors rode out a volatile year in 2011, a year fraught with concerns about a spreading euro zone debt crisis, the possibility of an economic recession in the United States, the first downgrade of the country’s credit rating and the fiscal impasse in Washington. Oil prices jumped higher from the turmoil in the Middle NFL jerseys cheap East, supply chains were disrupted by the earthquake in Japan and severe weather hamstrung American companies, said Hank Smith, the chief investment officer for Haverford Trust Company. With memories still fresh from the credit freeze that followed the financial crisis, companies accumulated cash, with those listed on the S.& P. piling up about 2 trillion. But they also cut costs, increased productivity and reaped the benefits of overseas revenue, all of which helped increase profits to record levels and made corporate earnings one of the few bright spots on Wall Street. Mergers and acquisitions also picked up, said Mr. Smith.
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