Fund Managers Starting To Agitate For Fatter Corporate Dividend Payouts

Friday, October 07, 2011 07:57
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Fund Managers Starting To Agitate For Fatter Corporate Dividend Payouts

Investors faced with a lack of income options elsewhere are relying on dividend checks, and activist money managers want to see those checks grow.

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Large U.S. corporations are sitting on $2.7 trillion in cash and equivalents.

 

But while they're paying out 27% of their current cash flow to shareholders, billion-dollar fund managers want to see that yield climb toward the historical average: 41% or even higher.

 

"Relatively higher yields are attractive to income investors who currently have few alternatives," sums up Howard Silverblatt, who tracks this stat for Standard & Poor's.

 

Interestingly enough, if you bring in small companies, cash flow yields edge up, but are still depressed by historical standards. For the entire universe of U.S. stocks -- and not just the S&P 500 -- the current cash yield expands to 30% versus a long-term average of 52%, Silverblatt says.

 

Of course, what makes dividends especially attractive is the favorable tax treatment.

 

Silverblatt is worried about a revived debate around raising the dividend tax rate to heat up going into 2012.

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