Thursday, 29 April 2010

Dividend slump ends as record cash lifts payouts

"Balance-sheet management has been stellar over the past two years," Jonathan Golub, the US equities strategist for Zurich-based UBS AG, wrote in a note to clients on March 29. "We continue to like high dividend yielding stocks as alternatives to money-market and short-duration bond funds."

More than 800 dividend decreases were announced in 2009, a year after the S&P 500 plunged 38 per cent for its worst annual performance since the 1930s. The January-to-March period in 2009 was the worst quarter ever for S&P 500 dividends with $US38.7 billion in reductions, according to S&P. The stock index sank to a 12-year low on March 9, 2009.

Billions in Cash

As the economy rebounded, cash balances rose to a record $US831.2 billion at the end of the fourth quarter, according to S&P data. One company cut its dividend and another suspended it during the first three months of 2010, the fewest since 2006, according to S&P.

"Dividends are emblematic of corporate strength," Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, who oversees $US55 million, said in a Bloomberg Television interview. "It is remarkable to me the level of cash on corporate balance sheets. It's certainly a strong vote of confidence for corporate America right now."


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