European corporates increase their dividends by 18pc
Published 19/08/2014 | 02:30
But analysts fear a worsening outlook. Europe's corporate earnings recovery has increased dividend payouts by the most in five years, new data has shown. And low interest rates and a further rise in profits should keep payouts flowing.
Although recent geopolitical uncertainty in Ukraine and the Middle East - combined with disappointing economic data out of Europe - have deflated hopes for a strong pick-up in corporate earnings in the short term, investors are betting the recovery is still on track and dividends can grow.
European companies, excluding British companies, paid out $153.4bn (€115m) in the second quarter, up 18.2pc year-on-year and the best performance on a constant currency basis in at least five years, according to Henderson Global Investors data tracking global dividends.
The second quarter is traditionally the peak season for European dividends, representing three-fifths of the annual payout, and was lifted this year by Europe's corporate earnings' recovery. Companies listed on Europe's STOXX 600 index posted a 10pc rise in second-quarter profits, helped by cost cuts and low borrowing rates.
The euro zone's flat economic performance in the second quarter has led European equity analysts to downgrade their earnings forecasts. They now expect European company earnings to rise 5.4pc this year, down from initial expectations in early 2014 for a rise of 11.8pc, according to Thomson Reuters Datastream.
Yet even 5pc growth would still be good compared to earnings that flattened between 2009 and 2013. (Reuters)
European stocks up on Ukraine talks
EUROPEAN shares rose yesterday amid an apparent thawing in tensions between Ukraine and Russia.
By the close in Dublin, the Iseq Overall Index was up 0.85pc or 39.63 points to end the trading day at 4712.22.
The leaders on the Dublin market included fruit company Fyffes, which was up 1.6pc to 94 cents as the European Commission announced that it would be reviewing its proposed merger with Chiquita.
The EU's competition wing will examine the planned deal and is expected to make a decision on September 19.
Packaging giant Smurfit Kappa was up 1.2pc to €16.44.
The laggards included insurance group FBD, which fell 1.1pc to €13.95, and speciality baker Aryzta, down 0.8pc to €68.22
Elsewhere, European stocks advanced, after equities had their biggest weekly gain in more than a month, as Ukrainian and Russian officials met for talks.
The Stoxx 600 rallied 1.2pc, the most in a week, at the close of trading in London, after advancing 1.5pc last week.
National benchmark indexes advanced in 16 of the 18 western-European markets yesterday.
France's CAC 40 Index rose 1.4pc, and the Dax Index jumped 1.7pc. The UK's Ftse 100 Index gained 0.8pc. Portugal's PSI 20 Index rallied 2.4pc, the most in a month and a fourth day of gains.
"Every time you have a de-escalation of geopolitical risk, it works favourably to the market," Steen Jakobsen, chief investment officer at Saxo Bank in Copenhagen, said. "The short-term direction of the stock market at the moment is driven almost entirely by whatever news is coming out of the Ukraine-Russia situation. I see this as a temporary relief."
United Internet added 3.8pc after saying it bought a 10.7pc stake in Rocket Internet. Renault advanced 2.5pc, helping a gauge of carmakers post the biggest gain among 19 industry groups in the Stoxx Europe 600 Index. Aker Solutions dropped 1.6pc.