European Comapanies Announce Results with Enhanced Dividends

The top companies in Europe seem to have announced their results for the first half of the year in an attempt to deliver figures before the summer holidays. The message delivered is similar for most industrial areas as profits have increased in a healthy way, but sales growth is obscured and probably difficult to discern in the future. Every time there is uncertainty, investors feel the same emotion. The muted responses of equity prices in positive corporate results have more to do with the tendency to avoid risk rather than a disappointment, according to an analysis of Reuters. However, the perception of risk may change at any time. Although there is no increase in sales, restoration of balance sheets and good profit margins enhance dividends. A typical example includes FTSE 100 Index listed UK businesses including defence group BAE Systems, the giant BAT of the tobacco industry and gas supplier Centrica has recently increased their dividends. The Royal Dutch Shell oil group and the publishing group Reed Elsevier repaid their debts by the strong growth in profitabilit, while pharmaceutical giant AstraZeneca raised the bar on its plans to repurchase shares.

The picture is similar across the old continent. After dividends of European shares fell 11% last year, Citigroup provided full restoration this year to pursue two-digit growth in 2011. Undoubtedly, the management of the companies spent a tremendous shock, since many of them saw their business to dry ‘by cash when the banks unable to lend at the peak of the crisis. But now the financial risks in business have declined significantly. This is not perceived by European high capitalization firms which reflect this to possible new recession fears.