While there’s been a lot of talk on Wall Street about improving earnings and economic growth, the truth is those talked-about improvements are not being reflected in global dividend growth. Executives usually think long and hard about how much cash they really have available to send out in dividends.Once they pay or increase a dividend, investors expect them to pay at least that much the next year. Basically, dividends are where the rubber meets the road in terms of business performance.
Since the presidential election, the stock market has marched forward on the prospects of faster economic growth, regulatory reform and tax cuts. So far, we have gotten none of these. The economy continues to grow at about 2%, there has been no significant regulatory reform and tax cuts are a hope on the distant horizon. We have no idea if or when any of these things will emerge, but investors are acting as if not only are they a done deal, but that the outcomes were exceptional.