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Swiss dividends at risk as franc fallout spreads
2015年1月27日 / 下午5点18分 / 3 年内

Swiss dividends at risk as franc fallout spreads

5 分钟阅读

* Swiss dividend ratios above average in Europe

* Payout ratios could become unsustainable

* Swiss earnings and dividend forecasts downgraded

By Blaise Robinson and Francesco Canepa

PARIS/LONDON, Jan 27 (Reuters) - Swiss companies with costs at home and sales abroad will have a hard time maintaining their historically generous payouts to shareholders as a surge in the value of the nation's currency eats into their earnings.

The knock-on effects of this month's removal of the cap on the Swiss franc have come thick and fast, not least for the country's private banking sector. But for many Swiss businesses the extent of the impact is still emerging, with fund managers and analysts expecting companies to trim dividends as the currency squeeze takes its toll of profits.

Such varied companies as Swiss Re, Swisscom , SGS, Givaudan, Zurich Insurance , Nestle and ABB have been paying out between 59 percent and 89 percent of their earnings in dividends, according to Thomson Reuters data, well above the 47 percent average for MSCI Europe companies.

"For an exporter already spending two thirds of profit on its dividend, it will now have to use 100 percent of earnings just to maintain the dividend," said Roland Kaloyan, head of European equity strategy at Societe Generale Corporate and Investment Banking.

"It won't be sustainable and it's something that has not yet been priced in by the market."

The implications extend wider. Dividends of Swiss companies are key for big pension funds and institutional investors, already stymied by the country's negative sovereign bond yields, and a cut in a company's dividend could spark a sell-off as yield-hungry investors dump the stock.

SocGen has recently downgraded its target on the Swiss equity index to 7,500 points by year-end, down about 10 percent from current levels.

Big Pharma Not Immune

A number of big pharmaceutical groups may have enough cash on their balance sheets to maintain or even raise dividends for the next year or two, analysts and fund managers said. But with big research departments in Switzerland suddenly becoming more expensive to run, they will still feel the currency pinch.

Though Novartis said on Tuesday that it would raise its dividend for 2014 to 2.60 Swiss francs per share from 2.45 francs the previous year, that increase was below the average dividend forecast of 2.67 francs in a Reuters poll.

The company, which has about 13 percent of its costs in Switzerland, said it expects the stronger franc to knock about 12 percentage points off core operating income this year and 7 percentage points off sales.

Other companies are likely to send similar warning signals as Europe's earnings season gathers pace and analysts have already started to cut profit forecasts. Estimates for 2015 have been cut by 2 percent in the past week, Thomson Reuters data shows.

"The big stocks in Switzerland are some of the best you could own in Europe, there's no question about that. But on the other hand, you could be sure that the negative earnings revision will hit them," said Jorg de Vries-Hippen of Allianz Global Investors, which has 345 billion euros ($390 billion) in assets under management.

Analysts have also started to trim dividend estimates for a number of Swiss exporters. The average forecast for Chocolate maker Barry Callebaut, which generates most of its sales outside Switzerland, has dropped by 8.9 percent over the past 30 days and the company said last week that the strong Swiss franc could hit its results.

Dividend estimates for sanitary equipment maker Geberit have fallen by 6.6 percent. Even before the scrapping Swiss franc's cap the company had said the currency's strength was hampering business, which relies on demand from Germany and other euro zone countries.

Some strategists said that foreign investors should sell Swiss stocks and pocket a big gain stemming from the currency swing before companies start to downgrade profit guidance and cut dividends.

"For euro, pound and dollar investors, these stocks have reached very expensive levels ... With the Swiss franc appreciation you get a big windfall profit and maybe it's better to take it," Allianz GI's De Vries-Hippen said. (Editing by David Goodman)

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