(May 4, 2012) — Investors looking to beat inflation with their investment returns may soon have to turn away from their favourite dividend-yielding assets, research has shown.
Pharmaceutical stocks, favoured by institutional investors for their steady dividends and non-cyclical nature, have shown little sign of company growth or chance of a raise in the rate of regular compensation, Data Explorers has found.
A note from Data Explorers said today: “The average yield across the pharmaceutical sector is 2% according to S&P Capital IQ with some companies paying a lot more. Growth [in this sector] is low, perhaps signalling concern about sustainability of payouts. A large proportion of these companies are expected to hold their payout flat – a cut in real terms in today’s inflationary environment.”
Inflation across the major developing countries is running considerably higher than 2%.
Additionally, the market monitor said Markit Divident Forecasting indicated that every sector, aside from banks, has projected a higher percentage of firms increasing their dividend payout.
Since 2008, there has been a significant drop in the percentage of companies increasing their shareholder dividends. From 60% of companies raising this payout in 2008, the number slumped to under 50% and has remained there ever since. Projected figures, reported by Data Explorers, show further increases are unlikely, with only a slightly smaller number of firms suspending or reducing their dividends than in the throes of the financial crisis.
Investors have also decided to make these shares work harder in their portfolio.
Data Explorers said: “Based on a Cap IQ screen of 82 global pharmaceutical companies with market cap over $1 billion, we see that institutional investors have placed just over 16% of their aggregate holdings into lending programmes, an increase of 1.3% over the past month. Average short interest has increased 3% over the same period and stands at 2.6% of the total shares.”
However, last month, Bank of America Merrill Lynch’s monthly survey of global investors found many had moved back into owning these defensive stocks as fear of another slump buzzed around markets.