More investors will evaluate options to enter dividend companies in view of the economic outlook, investment manager claims
The good performance of the global economy over the past two years has been reflected in corporate earnings, and companies have been able to distribute sizeable dividend payments. Sectors with stable cash flows and traditional business models — financials, real estate, mining companies, consumer goods — are paying dividends, and big tech companies are already starting to fall into that group.
This was commented by Tihomir Kaundzhiev, investment manager at Elana Fund Management, on the air of the show “In Development” on Bloomberg TV Bulgaria.
“Purely statistically, the technology company sector has increased its dividend payments by the largest average annual rate in the last five years – nearly 10%. This is thanks to the larger companies in the sector – those with an imposed operating model such as Apple, HP, Intel, said the guest. Smaller, early-stage companies, he said, do not yet maintain free cash flow. “If you’re going to rely on any kind of dividend payment from the tech sector, it’s going to be primarily the big companies that are big markets and with already proven business models,” said the guest.
“The Bulgarian market is moving at the same rate of growth of dividend payments as the global market,” Kaundjiev said. Many companies in Bulgaria do not have a dividend policy, but some in the sectors of consumer goods, agriculture, energy, raw materials paid significant dividends to their shareholders, the analyst noted.
“More and more investors will evaluate options for entering dividend companies in view of the economic prospects,” Kaundjiev believes.
Commenting on the impact of inflation and rising interest rates on dividend policies, Kaunjiev said companies may try to raise them in an attempt to make themselves more attractive.
“Inflation is a minimum required threshold, but the high levels at the moment could hardly be compensated for,” he pointed out. There is no way this can be achieved at the inflation levels of the last one year, but the dividends exceed the general inflation of the last 15-20 years, the guest added.
In 2023, companies with stable business models will be more resistant to excessive dividend expectations and lower free cash flows, as inflation will destroy some of the margins, Kaundjiev believes.
More from the conversation can be seen on the website of Bloomberg TV Bulgaria.