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18 Mar 2013
Forex Flash: Dividend-rich equities yield effective rate of return in Europe – Goldman Sachs
FXstreet.com (Barcelona) - As the risk premium has started to moderate, the desire to hoard cash on balance sheets should start to decrease. The incentives to either return cash to shareholders or invest in future growth are rising. A number of companies have increased dividends or paid special dividends this year and dividend expectations are rising.
According to the Economics Research Team at Goldman Sachs, “We find that companies that are increasing dividends have performed well. At the same time there is some evidence that companies that are increasing capex (or are direct beneficiaries of this spending) are also outperforming, a marked turnaround from the pattern in 2011. Unlike in the US, buybacks and M&A are much more muted as uses of cash so far in Europe.” Nevertheless, the pattern of improved performance for companies that are being more proactive with their cash is an encouraging trend and one that should continue to support rising shareholder returns.
According to the Economics Research Team at Goldman Sachs, “We find that companies that are increasing dividends have performed well. At the same time there is some evidence that companies that are increasing capex (or are direct beneficiaries of this spending) are also outperforming, a marked turnaround from the pattern in 2011. Unlike in the US, buybacks and M&A are much more muted as uses of cash so far in Europe.” Nevertheless, the pattern of improved performance for companies that are being more proactive with their cash is an encouraging trend and one that should continue to support rising shareholder returns.