Investors have been warned not to expect a dividend bonanza this corporate reporting season, as companies look to preserve their balance sheets in the face of an uncertain economic outlook.
Retirees often rely on these dividends, plus interest from their savings, to make up any shortfall in their incomes.However, analysts say it is unlikely companies will splash their cash this time around given the multiple potential perils and uncertainty ahead for the economy, including rising interest rates and inflation, together with commodity shortages and supply chain issues.
“Everything in their rear-view mirror has been strong because, over the past 12 months, we’ve been operating in a peak economy cycle, so the actual profit results will be OK,” he said. “But I think the earnings estimates for next year’s results will be downgraded.” “Particularly for discretionary retailers, we’re not sure about the level of consumer spending going forward. I would imagine their boards would err on the conservative side.”
Schellbach notes supermarkets could be one of the few sectors where investors could be surprised by stronger earnings or a more bullish outlook, though he still expects them to be somewhat conservative with their dividends, despite operating in a more stable section of the economy.
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