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’DPS vs. EPS
Dividends or earnings? Where should equity investors put their hope if Europe slides into a recession?
The former will likely outperform the latter, according to Morgan Stanley analyst Ronan Carr. He gives four reasons for this:
US banking stress tests 2.0 – an update
Aka — could your desire to release dividends survive a double-dip?
FT Alphaville reported back in November that the US Federal Reserve was looking at whether bank holding companies could distribute capital again without putting themselves — and everyone else — in danger.
Stress tests – the sequel
Ireland’s sort-of doing it — and now the US definitely is.
Stress tests v.2.0, that is.
Late on Wednesday, the US Federal Reserve issued its guidelines for financials that want to start paying out dividends again.
The Fed’s plan for bank dividends
The XLF’s performance in the past month:
That jump on November 4 coincided with the story that the Fed was set to allow well-capitalised banks to start increasing their dividend payments again. Only a few banks were expected to qualify at first,
Better Paid
Typical. You can clear out staff, send in a new chief executive and make a massive shift to safer operations — but in the end, floating the possibility that you’ll restore the dividend is what really moves you up in the market:
Desperately seeking income
In common with many investors, pension funds have a problem, which can be summed up in the following two graphics from UBS:
For a variety of reasons (two bear markets in a decade, the boom in liability driven investing and so on) pension funds and other institutional investors have slashed their weightings of equities and bulked up in bonds in the past quarter of a century.
Clutching at dividends
The world has become full of risk-averse investors, and stocks will suffer.
Wait — let’s edit that.
The world has become full of yield preservers, and they will suffer stocks. Or — as is current fashion — stock dividends.
James Montier on the value of dividends
FT Alphaville has been on a history kick lately, and thanks to James Montier — founder of the Behavioural Investing blog and a member of GMO’s asset allocation team — we can indulge it a bit longer.
Montier has just penned a new paper titled “A Man from a Different Time”,
Tarp-edoed dividends
Last week the US Treasury released its May Tarp report.
The department was quick to herald a milestone in the programme; Tarp repayments to taxpayers had, for the first time, surpassed the total amount of Tarp funds outstanding.
Rally round the (BP) flag
Rule Britannia, Britannia rule the horrifically polluted waves!
Shares in BP were up by over 5 per cent in early London trading on Friday:
Which has stabilised the collapse of recent days.
That’s despite more political pressure in the US over the energy giant’s oil spill response,
Dividend overboard at Man Group?
Strange but true. One of the highest-yielders in the FTSE 100 is Man Group. Shares in the struggling hedge fund manager offer a prospective dividend yield of almost 12 per cent (in dollar terms).
Usually when a blue chip company yields that much it can only mean one thing — the dividend is about to be slashed.
How market making (ahem, prop trading) saved the day
Some interesting points raised by Andrew Haldane, the Bank of England’s financial stability executive director, in a speech given in Liverpool on Wednesday.
Namely:
Global banks’ net income in 2009 is expected to be around $60 billion,
Re-equitisation vs de-equitisation
At the start of this decade the amount of listed equity in Europe weighted against total market capitalisation began to drop off.
The explanation for this was three-fold. Firstly, debt was cheaper than equity,
Lex: BP
The oil giant’s numbers look good at first glance, but upon closer inspection there is still much work to be done.
It all looks fairly rosy, until you peer more closely into the numbers. The challenge that BP faces is common to all oil companies:
Safe for now
BP OUTPUT RISES AS CEO HAYWARD SEES COSTS FALLING $1 BILLION MORE THAN EXPECTED BY YEAR-END.
Compared to the same period last year, BP’s reported daily production jumped 4 per cent to more than 4 million barrels of oil equivalent in the three months to end-June.
Coming up, worst year on record for dividends
The chart below – from UBS – shows the estimated and actual percentage of FTSE companies cutting dividends since 1995.
It’s not exactly a surprise, of course, but the forecast for 2009 is still shocking.