Companies in the euro area are poised to cut dividends to the lowest level in four years as chief executive officers stockpile cash to weather the region’s sovereign-debt crisis.
Payouts to shareholders in the Euro Stoxx 50 Index (SX5E) will fall by 3.3 percent to a combined 115.48 euros a share this year, according to more than 500 analyst estimates compiled by Bloomberg. Reducing them by that much would cut the dividend yield to 4.3 percent from 6.3 percent in September 2011, even after cash on balance sheets climbed to the highest since 2008, the data show.
The forecasts suggest more companies will follow Royal KPN NV and Enel SpA (ENEL) in reducing payouts as the debt crisis pushes unemployment in Spain and Greece to more than 25 percent and China’s economy cools. Analysts are cutting estimates amid a rally that has sent the Euro Stoxx 50 to a 17-month high as central-bank measures hold down bond yields.
“Within Europe, it’s excess cash on balance sheets” that attracts investors, said Bank of America Corp.’s John Bilton, European investment strategist at Bank of America’s Merrill Lynch unit in London. “The current levels of dividend yield are not sustainable.”
Get our news and articles