Support for Income Argument

David Rosenberg, of Gluskin Sheff, and I are on the same page... at least in terms of this income theme.  He writes today:



"Well, despite a huge amount cash on corporate balance sheets ($837 billion for
the S&P 500 nonfinancial sector – 26% higher than a year ago), it seems
obvious by now that this is only leading to a moderate cycle in capital spending –
and it looks like growth in business outlays may have already peaked.
This cash hoard plays nicely into “income” strategies. First, the tremendous
amount of liquidity helps bolster the balance sheet and mitigate the risk of
default – hence our constructive stand on credit and in particular, at this point in
time with regards to risk-reward ratios, the BB sliver of the corporate bond
universe. And also our dividend products stand out as having tremendous
investment properties in these tumultuous times.
S&P 500 companies paid out over $50 billion in dividends in Q2, up 2.3%
sequentially and 5.9% above year-ago levels (meanwhile, M&A is actually down
10% YoY!). We recall when tech stocks refused to pay out dividends but lo’ and
behold, cash-generating machines like Intel provides a 3% yield, GE is also 3%,
and even Microsoft and IBM spin off 2% dividend yields too (you have to go
beyond the 5-year part of the Treasury curve to achieve that). Utility yields are
closer to 4% and REIT funds over 3%. And guess what? One of the most
attractive markets right now relative to bonds may well be Japan where the 2.2%
dividend yield on the TOPIX is slightly ahead of the S&P 500 and is now double
what you can garner in the 10-year JGB!"