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Alpine Dynamic Dividend Institutional Message Board

  • porkus_chopius porkus_chopius Jun 4, 2010 11:56 AM Flag

    The lure of the dividend

    Most European companies will either pay an annual dividend or an interim and a final. An interim has likely already been paid. At this year's annual general meetings -- often held in May -- shareholders vote on recommended dividends, which companies calculate based on what they earned in 2008.

    "Until the U.S. housing market is stabilized and the financial sector is stabilized, the economic outlook is negative, which is negative for dividends and share prices," said Kevin Shacknofsky, who manages the U.S.-based closed-end Alpine Global Dynamic Dividend /quotes/comstock/13*!agd/quotes/nls/agd (AGD 7.91, -0.09, -1.13%) and Total Dynamic Dividend /quotes/comstock/13*!aod/quotes/nls/aod (AOD 6.79, -0.15, -2.16%) funds.

    He said European dividends have been very attractive for U.S. dividend investors given that European markets typically yield nearly double that of the U.S. market -- 4% for the S&P 500 vs. 7% for the Stoxx 600.

    "Unfortunately, the highest paying sectors in Europe have been the financials and industrials that are experiencing the weakest fundamentals and largest earnings pressure which will result in falling dividends," said Shacknofsky.

    "There is also government intervention, specifically in the U.K. who has discouraged rescued financials from paying dividends, and the German government who is trying to discourage all companies from paying dividends. Thus there is a negative prognosis for European dividends."

    He said the prognosis of a 48% fall in Stoxx 50 2010 dividends is indeed extremely negative, "but shows the possible risk due to the need for companies to deleverage and the need to conserve cash."

    The modus operandi, said Shacknofsky, is to find companies with relatively low payout ratios, low debt, dividends covered by cash flow and that operate in industry sectors which have low economic sensitivity will have sustainable dividends.


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