European companies will reduce dividends at the fastest pace since 1999

In the next 18 months, European companies will reduce dividends at the fastest pace since 1999 amid the world recession and liquidity deficit, Bloomberg reports.

This conclusion was based on the analysis of the futures market. The Dow Jones Euro Stoxx 50 Index Dividend Futures, which allows investors to evaluate future payments of companies, shows a possible reduction in 28% in 2009 compared to 2008. In 2010, the decrease will be 32%.

“There are still a lot of companies left that do not have enough funds and which consider reducing dividends in a simple way to reduce dependence on borrowed capital,” quotes the agency of the Deputy Chairman of the Board of Directors of the London Credit Suisse Asset Management Bob Parker. “Dividends will be noticeably reduced, and more and more companies will do everything possible to improve the indicators of monetary Streams ".

The influence of the recession will be so noticeable that dividends will most likely decrease, despite the possible increase in the net profit of European companies by an average of 10% this year and 22% in the next, analysts predict.

Based on the results of trading on the Dow Jones Euro Stoxx 50, Index Dividend Futures, dropped to 113 points, which is 28% lower than 157.7 points recorded in the same period in 2008. A decrease in the index suggests that investors expect an equivalent reduction in dividends.