DIVIDENDS provide the vast bulk of long-term returns from equities. Work
by Elroy Dimson, Paul Marsh and Mike Staunton of the London Business
School shows that the real annual total return from American shares
since 1900 has been 6.4%. Capital gains supplied just a third of that
figure; reinvested dividends accounted for the rest.
股息是股票可以一劳永逸得到的要害收入。London商大学的Elroy Dimson, Paul 马尔斯h和
So the outlook for dividends ought to be crucial for equity investors.
They should be concerned that, in some markets, dividend income is
concentrated in a small number of stocks (see chart). In Australia,
Britain, France, Germany and Switzerland, more than 70% of the dividends
come from just 20 companies.
That leaves investors’ income dependent on the fortunes of just a few
industries. Banks were big dividend-payers until the financial crisis of
2008; energy and mining companies have been good sources of income since
then. But falling commodity prices are leading energy companies to
reduce their payouts. Last year 504 American companies cut their
dividends, according to Standard & Poor’s, a credit-rating agency,
compared with 291 in 2014. Energy companies made up nearly half of the
dividend-cutting group in the fourth quarter.
As a result of these cuts, dividends are growing more slowly than
before. In the fourth quarter of 2015, dividends rose by $3.6 billion in
cash terms, compared with a $12 billion increase in the same period of
- Investors who need income are now relying on the pharmaceutical
and health-care sectors; research by Andrew Lapthorne of Société
Générale, a bank, shows that the three largest stock holdings of global
income funds are Pfizer, Roche and Johnson & Johnson.
The narrow base of dividend provision is important when it comes to
judging the attractiveness of equities. In some markets, dividend yields
are higher than government-bond yields; in Britain, for example, the
FTSE All-Share index yields 4% whereas 10-year gilts offer just 1.7%.
For some, this makes equities a bargain.
Until the 1950s it was the norm for equities to have a higher yield than
bonds. Shares were perceived to be riskier than government bonds so
investors demanded higher payouts for owning them. But opinion changed
as the market began to be dominated by institutional investors—pension
funds and insurance companies. Their size allowed them to own
diversified portfolios, in which the consequences of the failure of an
individual firm were much reduced. Thus hedged, they piled into equities
to capitalise on the tendency of dividends to grow over time. Interest
payments on bonds, in contrast, are fixed, which was a particular
problem in the inflationary environment of the 1960s and 1970s. As a
result the dividend yield dropped below the government-bond yield in
most markets and stayed there.
Since the financial crisis of 2008, the ratio seems to have undergone
another fundamental shift. Government bonds are valued for their safety,
particularly in a world of low inflation. A high yield on an equity,
meanwhile, may simply suggest that investors expect the dividend to be
cut. Shares in BHP Billiton, a mining group, have plunged along with
commodity prices. That makes their yield, calculated using last year’s
dividend, look extremely high, at 12%. But analysts expect the dividend
to be cut in half this year. Investors may also be seeking a higher
overall dividend yield on equities to reflect the riskier nature of the
income stream now that dividends are more concentrated among fewer
能源公司，What about share buy-backs? They are an alternative source of income for
investors; for some, they are a more tax-efficient way of receiving
cash. But buy-backs are much more variable than dividends: the amount
spent on them by non-financial companies in the S&P 500 index fell from
over $400 billion in 2007 to under $70 billion in 2009, according to
Deutsche Bank. Companies can quietly trim their buy-back programmes; a
dividend cut is a public sign of trouble. And, of course, investors who
sell their shares in a buy-back need to find some other asset to replace
that source of income.
Investors ignore dividends at their peril. In more than a century of
data, across 19 countries, the LBS academics found that annual returns
from the markets with the highest dividend yields were eight percentage
points higher than those from the lowest-yielding markets. So during the
current reporting season, smart investors will be looking not just at
notional earnings (which can be a highly subjective measure) but at the
cold, hard cash that companies are shelling out.