Picture a kangaroo in a sauna, its pouch stuffed with cash. The Aussie banks are where you go for bank dividends, paying out practically all their earnings in durable swimable plastic cash.
But Citi would like to draw your attention North: Read more
The consequence of his incredible success finally caught up with Warren Buffett last year. At its 44th attempt, the S&P 500 finally grew faster than the book value of Berkshire Hathaway over a five year period. Mea culpa is expected in the annual letter to shareholders next month.
What that has prompted is some retreading of the reasons why Berkshire doesn’t pay a dividend. In essence, this empire of insurance, stocks and real businesses has been built on compounding retained earnings. The Sage of Omaha keeps the money because he can invest it better than you. Read more
Enthusiasm for emerging markets stocks is perhaps a little dampened of late, along with every other risk asset. But there’s still a widespread and intuitive perception that equities in a fast-growing economy are likely to be a good bet. In fact judging from this report by Bloomberg, there is strong foreign interest in Chinese stocks, which have been in a bear market for well over 18 months (never mind that domestic investors see things very differently).
But the broad assumption that GDP growth equals a good equities opportunity is wrong, according to Morgan Stanley. Read more
Yes, we said they failed the Fed stress tests. But maybe it’s not quite so dire as it sounds.
First, remember that Citi’s tier one capital ratios only fell short by 0.1 per cent — they came in at 4.9 per cent rather than the 5 per cent minimum. Read more
Ford will pay a quarterly dividend for the first time since September 2006, marking another step in its turnaround after the auto-maker’s decline five years ago, the WSJ reports. Investors will receive the five-cents-per-share dividend on March 1, after Ford ran a series of stress tests on its cash position. The stress tests mean that the dividend will return even if there is another economic downturn, Ford said. Chief executive Alan Mulally will collect about $875,000 each quarter in dividends on his 17.5m shares, having led the company from $12.7bn losses in 2006 to $6.6bn in earnings for the first nine months of 2011, the FT says.
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: Read more
Microsoft has raised the dividend on its shares by 25 per cent, the biggest increase in the eight years it has made the payments, though the move still falls short of some demands for it to use more of its cash pile to reward shareholders, the FT reports. The world’s biggest software company announced on Tuesday that the payment would be increased by 4 cents a quarter, to 20 cents. The move marks an acceleration of recent dividend raises, following an increase of 23 per cent last year and of 18 per cent the year before. At 2.97 per cent, the payment leaves Microsoft with one of the highest dividend yields among big tech groups, which have traditionally not relied on dividends as a way to reward shareholders.
UK shareholders have received their largest dividend pay-outs since the collapse of Lehman Brothers almost three years ago, in a sign that companies are increasingly confident about the health of their balance sheets, the FT reports. Companies returned £19.1bn to shareholders in the three months to July, 27 per cent more than the £15bn issued during the same period a year earlier, according to research from Capita Registrars. Mining companies returned £1.85bn during the quarter - an almost four-fold increase on a year earlier – on the back of surging commodity prices. However higher dividends were a feature across most sectors.
UK dividends grew faster in the first quarter of this year than at any time since the collapse of Lehman Brothers, according to research from Capita Registrars. A special pay-out from International Power and BP’s resumption of quarterly payments after last year’s oil disaster helped the total value of dividends paid in the first quarter of the year rise to £15bn, reports the FT.
The Federal Reserve is is expected Friday to free some of the nation’s biggest banks from strict oversight—a milestone in the government’s effort to prop up an industry that was in danger of collapsing more than two years ago, the Wall Street Journal says. The Fed will now allow financial institutions that have passed a fresh round of stress tests to run their businesses independent of crisis-era restrictions imposed in 2008, permitting banks to raise dividends and buy back shares.
The largest US financial services companies are poised to unleash a flurry of dividend increases, stock buy-back plans and, in some cases, equity offerings as early as this week, the FT reports. Nineteen financial groups, which range from leading banks such as JPMorgan Chase to credit card companies and regional lenders, are eagerly awaiting the results of a battery of tests that the Federal Reserve began in January to gauge how their balance sheets would withstand various economic and financial shocks.
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. Read more
Goldman Sachs’ attempt to spend some of its $170bn excess capital on loans, real estate and other distressed assets is being hampered by a prolonged rebound in risk appetite that has lifted prices on many would-be bargains, the FT says. Goldman’s financial strength in the wake of the crisis has helped the bank stockpile “excess liquidity,” or cash deposits and securities it could sell or pledge quickly, but the assets have weighed down its returns. Undaunted, Goldman executives have said they would continue to prioritise these deals above accelerating stock buy-back plans or raising dividends.
Dividend payments from listed UK companies will rise 11.5% this year after two years of falling pay-outs amid the financial crisis and BP’s oil spill disaster, reports the FT citing a study by Capita Registrars, an arm of the outsourcing specialist. But the forecast rise to £63bn ($100bn) would mean that dividends were still lower than the cash paid out in 2007 and 2008. Nevertheless, the trend reflects increased corporate confidence and the probable return to the dividend list of BP, which on Tuesday is expected to reinstate investor payments after suspending them following last year’s Gulf of Mexico disaster. BP’s importance to income investors was underlined by Capita’s study, which found that, taking the oil group into account, dividends from companies on the main London market fell 3.3% last year, while UK companies excluding BP actually raised their pay-outs by 7.5%.
Large US financial groups are bracing for a new round of stress tests to determine whether institutions are now healthy enough to raise dividends and buy back shares, reports the FT. The Fed is expected this week to begin examining data provided by 19 groups, including Goldman Sachs, JPMorgan and Bank of America. According to the WSJ, banks had to submit their capital plans to the Fed by last Friday to be eligible to raise their dividends or repurchase stock. The central bank, after a review of the plans that is expected to take about three months, is likely to permit a large group of these financial institutions to raise their dividends, analysts say.
Ireland’s sort-of doing it — and now the US definitely is.
Stress tests v.2.0, that is. Read more
The Federal Reserve on Wednesday paved the way for the largest US banks to increase dividends and share buy-backs next year, announcing what it described as “a common, conservative” set of regulatory guidelines, reports the FT. The top 19 institutions, including Goldman Sachs and Morgan Stanley, will have to deliver a comprehensive capital plan by early next year, detailing how they will meet tougher, “Basel III” reserve criteria. Meanwhile, says the FT in a separate report, US political opposition to the Fed’s new $600bn round of quantitative easing – or “QE2″ – is fuelling calls among some Republicans for a change in the Fed’s mandate, dropping its goal of maximum employment and requiring it to focus on inflation. Reuters adds that Fed officials defended their easing measures on Tuesday, citing the need to shore up the fragile US recovery.
The XLF’s performance in the past month:
US bank regulators have eased their tough stance on dividend hikes and share buy-backs as the sector’s fortunes have improved, paving the way for the return of billions of dollars in capital to shareholders, say executives and officials. The FT reports that banks such as JPMorgan Chase and Citigroup have in the past week used their third-quarter results’ announcements to detail plans to increase dividends or repurchase their stock. Goldman Sachs, which did not provide any specifics during its investor call, is also poised to take advantage of the regulators’ more lenient approach. People familiar with the situation said Goldman was close to securing permission from the Federal Reserve to pay $5.5bn to redeem preferred shares held by Warren Buffett’s Berkshire Hathaway. The deal would lead to an accounting charge of $1.1bn but would free Goldman from the demanding terms won by the billionaire investor at the height of the financial crisis, they added.
Bob Dudley, the new chief executive of BP, has suggested that the UK oil group is on course to restore dividend payments next year after suspending them following its Gulf of Mexico oil spill disaster, reports the FT. As he prepared to formally take over as chief executive on Friday, Dudley told the FT that the board would not make a final decision until next year, but that prospects for a resumption of pay-outs were “encouraging”. BP said in June it would cancel its previously declared first-quarter dividend and interim dividends for the following two quarters, as it had agreed to set up a $20bn escrow fund to pay spill-related claims.
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:
In common with many investors, pension funds have a problem, which can be summed up in the following two graphics from UBS:
The world has become full of risk-averse investors, and stocks will suffer, says FT Alphaville. 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. However, there’s something of a temptation to equate dividends to buying stocks outright. But according to Lombard Odier, even though dividend yields are now reaching 10 year bond yield levels in the US, it’s a dangerous temptation. Read more
A group of hedge funds and investment firms that hold debt insured by a business of Ambac Financial Group sought in a US court on Monday to stop payouts by the beleaguered bond insurer to its parent, the WSJ reports. The plaintiffs, including Aurelius Capital, Fir Tree, King Street Capital, Monarch Alternative Capital and Stonehill Capital told a Wisconsin state court they hold more than $1bn in mortgage securities or other debt insured by Ambac Assurance, the main operating business of Ambac Financial.
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”, which he begins by looking into the historical importance of dividends to stock returns (emphasis ours): Read more
Phoenix Group, the “zombie” life fund business formerly known as Pearl Group, is looking to raise cash from its £10bn book of annuity policies so that it can explore closed life fund acquisitions more quickly, according to the FT. The company, which moves to a full primary listing on the London Stock Exchange on Monday from a split secondary listing and Amsterdam listing, needs to pay down 10 per cent of its nearly £3bn in bank debt before it can explore new deals and escape a dividend cap.
A deal struck by British Airways on Tuesday to plug the £3.7bn hole in its two pension schemes will restrict it from making any dividend payments to its new parent company, after its planned merger with Iberia, for at least the next two years, says the FT. The deal helps clear a potential obstacle to the BA-Iberia tie-up due to be completed by the end of this year.
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. But underneath the headline lay a continuing deterioration in the ability of some banks and thrifts to actually pay their dividends. Read more
Rule Britannia, Britannia rule the horrifically polluted waves!
Shares in BP were up by over 5 per cent in early London trading on Friday: Read more
Bank dividends across Europe are running at their lowest level on record, as the continent’s recovering financial groups, under pressure from regulators, opt instead to retain earnings to boost capital, the FT says. The average dividend yield among the continent’s banks is now only 1.9 per cent, according to Thomson Reuters Datastream, well below historic averages.