Labor’s Share of Income Plummets While Peronal Dividend Income Soars

Posted by David Hunkar on 18 May 2012, 8:07 pm

U.S. Corporations posted record profits in 2011 according to the latest Fortune 500 list published by Fortune magazine earlier this month. Despite the high unemployment rate in the country, the biggest 500 companies raked in a record-breaking $824.0 billion in combined profits last year. This amount is up 16% from 2010.

Exxon Mobil, the highest ranked firm in the list, alone made a profit of $41.1 billion, up 35% from previous year. The oil giant’s dramatic rise in profit is simply the result of sky-rocketing oil prices in 2011.

Meanwhile since the global financial crisis millions of workers have lost their jobs and many continue to remain unemployed. In April, the unemployment rate stood at 8.1% with some 12.5 million Americans unemployed according to official BLS data.

As U.S. companies’ profits soar many pay a higher amount of their earnings in dividends. Since most of the outstanding public stocks are held by the wealthy the majority of the dividend payments go to them. However for many years labor’s share of income has declined. In fact, according to a report by the Council on Foreign Relations labor’s share of income has plummeted since 2009 while personal dividend income as a percentage of disposable income has soared.

Click to enlarge

Source: Where Have All the Profits Gone? Karl Marx Could Have Told You, CFR

The decline of labor’s share of income is not beneficial to the country in the long run.

Knowledge is Power: Gold, Greece, French Economy Edition

Posted by David Hunkar on 17 May 2012, 7:32 pm

How to cope with panicky markets

Is gold near a bottom?

Gold’s hasty demise from safe haven to risky asset

Defying the Odds – Why the French Economy Works Surprisingly Well

If Greece goes: An exit is likely to shatter faith in the eurozone’s integrity for ever

How Much Is Enough?

Eurozone crisis: what if … Greece leaves the single currency

Click to Enlarge

Winner in the “Best of Russia” photography contest, 2011

Courtesy: Photo Gallery: Moscow from on High, Der Spiegel

10 Foreign Dividend Paying Stocks To Consider

Posted by David Hunkar on 17 May 2012, 12:59 am

The dividend yield on the S&P 500 is around a measly 2.0%. For investors looking to earn higher income from investing in equities, foreign stocks provide an attractive investment opportunities. Generally foreign stocks have had higher dividend yields when compared to U.S. due to many reasons. The following chart shows that U.S. equities had a dividend yield of just 2% at the end of 2011 while global income stocks had yields of over 5%:

Click to enlarge

Source: A global search for dividends, Fidelity Investments

From the Fidelity Viewpoints interview of Ramona Persaud, manager of the new Fidelity Global Equity Income Fund :

Q: Why have non-U.S. stocks historically tended to deliver higher dividend yields?

Persaud: There seem to be specific factors on a country-by-country basis that help explain the prevalence of higher yield outside the United States. For example, shareholders in parts of Asia where there is high family ownership often demand cash returns from their equity investments. In the U.K. and Chile, pension funds have had large ownership stakes and have advocated for high payout rates. In Brazil, there is a minimum 25% payout of earnings set by law. In Australia and New Zealand, dividends are often not subject to double taxation, as they are here in the U.S., so that incentivizes high payout ratios. Other examples are found in countries with a history of hyperinflation—such as Indonesia, Argentina, and Germany—where above-average dividend yields suggest that investors demanded high payouts to help offset inflation and earn real returns. So from a global perspective, there are great yield opportunities across the world, and this includes the United States, as I believe income is at a cyclical low here, with conditions ripe for a rebound.

Ten foreign stocks currently paying dividends of over 5% are listed below for further research:

1.Company:CorpBanca SA (BCA)
Sector: Banking
Current Dividend Yield:7.71%
Country: Chile

2.Company:National Grid PLC (NGG)
Sector: Electric Utilties
Current Dividend Yield: 5.61%
Country: UK

3.Company: Chunghwa Telecom Co Ltd(CHT)
Sector: Telecom
Current Dividend Yield: 6.16%
Country: Taiwan

4.Company:City Telecom (CTEL)
Sector: Telecom
Current Dividend Yield: 7.05%
Country: Hong Kong

5.Company:Philippine Long Distance Telephone Co (PHI)
Sector: Telecom
Current Dividend Yield: 5.85%
Country:Philippines

6.Company: Vodafone Group PLC (VOD)
Sector: Telecom
Current Dividend Yield: 5.35%
Country: UK

7.Company:Companhia Siderurgica Nacional (SID)
Sector:Basic Materials
Current Dividend Yield: 6.26%
Country: Brazil

8.Company:Administradora de Fondos de Pensiones Provida SA (PVD)
Sector:Investment Services
Current Dividend Yield: 8.38%
Country: Chile

9.Company:Alumina Ltd (AWC)
Sector:Metal Mining
Current Dividend Yield: 6.42%
Country: Australia

10.Company:Australia and New Zealand Banking Group Ltd (ANZBY)
Sector:Banking
Current Dividend Yield: 6.60%
Country: Australia

Note: Dividend yields noted are as of May 16, 2012

Disclosure: Long BCA

Comparing Bank Stocks Performance in Euro Zone, US and Emerging Markets

Posted by David Hunkar on 16 May 2012, 12:23 am

The following chart shows the performance of bank equity prices in Euro area, U.S. and emerging markets from the end of 2009 thru April, 2012:

Source: Euro Briefing, April 2012, Institute of International Finance

U.S. banks are better performers than European banks and even the banks in emerging markets as shown by the green line. The key takeaway from the chart is that the gap between U.S. and Euro zone bank stock prices continues to widen since 2010. European banks continue make lower lows while U.S. banks have recovered swiftly. One of the reasons for the disastrous performance of Euro zone banks is that they failed to raise significant capital since the credit crisis unlike their American peers.