Dividends and Investors eye a high mark in US profit growth as inflation fears deepen

In June many companies held their Annual General Meetings to elect Board of Directors, appoint auditors, determine executive compensation and report on how the year ended. That is good, however on Wall Street that was yesterday and today there are new concerns. How is the quarter going? what is the impact of inflation? are margins okay?

In an article by Caroline Valetkevitch of Reuters, for the second quarter earnings, analysts are expecting a 64% jump over a year ago, the biggest increase for any quarter since 2009 according to IBES data from Refinitiv.

According to Jonathan Golub, chief US equity strategist and head of quantitative research at Credit Suisse, right now companies are able to pass on all the higher input costs to their consumers, so profit margins are under no pressure at all.

The S&P 500 is up 11% in 2021, yet the index is trading at 22 times forward earnings, slightly below the 23.5 times at the start of the year, according to Refinitiv.

Next year’s outlook is less clear. The S&P is currently projected to increase by 36.5% in 2021 and in 2022 a more normal 11.7%.

Linking to dividend paying stocks, the stock market values have increased and all investors like that. While we will all take 20% plus gains, the normal is not 20%, financial planners budget for 4% gains. As a dividend investor while you enjoy the gains in the value of the stock, your bias is the dividend which continues to pay you. The growth in the value of the stock is the extra and for the past year or two the extras have nicely increased the value of your wealth.

There are more questions than answers, till the next time – to raising questions.

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