Investors and Financial Execs Agree Dividends Are On the Rise
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Investors and Financial Executives Agree: Dividends Are On the Rise
Summary
A recent study by Boston-based investment manager Eaton Vance reveals increasing appeal for dividend-paying stocks among senior finance executives at American corporations.Article
According to a study by Eaton Vance, a Boston-based investment manager, senior finance executives at dividend-paying American corporations have noted a growing interest in stocks that pay dividends. This nationwide survey, which included executives from all major corporate sectors, also predicts sustained long-term dividend growth.
Conducted by Penn, Schoen & Berland Associates, Inc., the survey found that 47% of finance executives expect dividends to grow faster than earnings in 2006. This aligns with Standard & Poor's research showing that dividends have recently outpaced corporate earnings. Duncan Richardson, executive vice president and chief equity investment officer of Eaton Vance, observed, "With healthy balance sheets and cash flows, American companies are well-positioned to continue increasing dividends."
But how long is this trend expected to last? Among the executives confident that dividends will keep outpacing earnings, 60% believe this will continue for one to two years, with 25% expecting it to last up to five years. However, this trend might hinge on whether Congress extends the current tax cuts on dividends. Richardson added, "If tax cut extensions don't pass, and dividends are taxed at a higher rate, companies might not sustain their current dividend increases."
Regardless of potential tax changes, the key takeaway is that companies are increasingly rewarding investors with higher dividends. Most finance executives (six out of seven) see a company’s history of raising annual dividends as a sign of shareholder-friendly behavior. Moreover, 80% believe a firm's dividend growth rate instills confidence in its long-term growth potential.
Investors echo these sentiments. In Eaton Vance's sixth annual investor survey, 78% of polled investors view dividend-paying companies positively, seeing dividends as indicators of financial stability.
"There’s been a marked shift from growth investing towards a more conservative, value-oriented approach," said Richardson. He noted that while the 1990s favored stock buybacks?"which boost reported earnings per share?"today’s investors (57%) now prefer regular quarterly dividends over stock buybacks (23%) or special dividends (8%).
Richardson concluded, "Dividends have made a comeback, and value investing is back in favor."
Eaton Vance Corp., trading on the New York Stock Exchange under the symbol EV, managed over $113.3 billion in assets as of January 31, 2006. Their clientele includes investment companies, corporations, hospitals, retirement plans, universities, foundations, and trusts.
Penn, Schoen & Berland Associates, Inc., based in Washington, D.C., provides strategic polling and market research services.
Investment Note
Prospective investors should carefully consider the investment objectives, risks, charges, and expenses of any Eaton Vance Fund before investing. The Fund's current prospectus, available through financial advisors, provides this information. Please read it carefully before investing.You can find the original non-AI version of this article here: Investors and Financial Execs Agree Dividends Are On the Rise.
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