Why UK companies’ payout potential is still strong

Dividend payout ratios

The traditional UK equity income space is better placed to satiate yield-hungry investors going forward as dividend payout ratios become more consistent with their 15-year average.  In a world with muted economic growth, projects with acceptable investment returns, or attractively priced  acquisitions are harder for companies to come by. This means they can grow their dividend even in the absence of earnings growth. Against this backdrop income-orientated companies will continue to be rewarding for investors

Emma Mogford, Newton

 

The traditional UK equity income space is better placed to satiate yield-hungry investors going forward as dividend payout ratios become more consistent with their 15-year average.  In a world with muted economic growth, projects with acceptable investment returns, or attractively priced  acquisitions are harder for companies to come by. This means they can grow their dividend even in the absence of … read more

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Germany is no superman for eurozone plight

Right now, Germany is much better off than it was ten years ago. Unemployment is very low and earnings are rising, but there is little inflation. Public finances are in good shape. The trouble in my view is that expectations about what Germany can contribute to the global economy have become unrealistic. Germany used to be viewed as the sick man of Europe, then people began to call it the locomotive of Europe, so the perception went from unrealistically negative to unrealistically optimistic. I don’t see a political willingness to work against its national interest. There may be further infrastructure spending announced, but it won’t be a big programme.

Holger Fahrinkrug, Meriten Investment Management

Right now, Germany is much better off than it was ten years ago. Unemployment is very low and earnings are rising, but there is little inflation. Public finances are in good shape. The trouble in my view is that expectations about what Germany can contribute to the global economy have become unrealistic. Germany used to be viewed as the sick … read more

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Is the dollar strength positive or negative for consumer staples?

Overall, third-quarter earnings season for the consumer staples sector has remained largely underwhelming, consistent with its recent past. But several management teams have backed away from their bearish stance and begun to speak constructively about the US for the first time since the financial crisis. The strengthening dollar has been a double-edged sword for many consumer staples companies in the quarter, though. Many of them took a 5-7% haircut to reported earnings because of currency translation, and based on recent spot prices, they may take another 5% hit next year. There is potential upside, however: A stronger US dollar usually means declining commodity prices, which are a positive for the group.

 

David Sealy, The Boston Company

 

 

Overall, third-quarter earnings season for the consumer staples sector has remained largely underwhelming, consistent with its recent past. But several management teams have backed away from their bearish stance and begun to speak constructively about the US for the first time since the financial crisis. The strengthening dollar has been a double-edged sword for many consumer staples companies in the … read more

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How falling oil prices have muddied monetary policy waters

5 November 2014

Expectations of the timing, and extent, of future Bank of England rate rises have changed significantly since the summer. This has coincided with lower inflation readings and a sharp decline in the oil price.  At Newton, our focus on our debt burden theme has led us to doubt whether a policy of low interest rates and forced asset inflation, which aims to drag spending from the future into the present, could create a sustained upswing in nominal demand. Could further evidence of deflationary pressures see investors begin to consider if the next policy move will, in fact, be greater stimulus?

Peter Hensman, Newton

Expectations of the timing, and extent, of future Bank of England rate rises have changed significantly since the summer. This has coincided with lower inflation readings and a sharp decline in the oil price.  At Newton, our focus on our debt burden theme has led us to doubt whether a policy of low interest rates and forced asset inflation, which … read more

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