In a recent study released by the Boston-based investment manager, Eaton Vance, senior financial executives at U.S. equity firms agreed that shareholders were increasingly complaining. A national survey of executives from all sectors of large companies has also revealed growth in long-term shares.
A study, conducted by Penn, Schoen & Berland Associates, Inc., found that 47 percent of financial managers expect stock growth to continue to outpace earnings in 2006. This assumption is consistent with Standard & Poor's research, which found that profits increase rapidly. there is a business profit in the past year. Duncan Richardson, senior vice president and chief investment officer for Eaton Vance, commented, "With strong balance sheets and cash flow, American companies have the means and motivation to continue to increase profits."
How long will this trend last? For managers who believe that profits will continue to exceed revenues, the majority (60 percent) expect the process to last for one to two years. Another 25 percent expect the practice to last for five years. However, the length of this practice may depend on whether Congress extends its current reduced tax rate to dividends. According to Mr. Richardson, "Businesses may not continue to increase their profits if tax deduction extensions fail and profits are taxed at a higher rate."
Regardless of whether it is possible to extend the provisions of the current tax laws, "the important thing that takes place is that companies are increasingly returning more to investors in the form of shares," he said. Richardson. With many shareholders spending too much money on stocks, six of the seven financial executives interviewed said they viewed the company's history of increasing annual shares as a way to reflect the good behavior of shareholders. In addition, 4 out of 5 believe that a corporate growth rate can give investors confidence in the company's long-term growth potential.
Investors interviewed last year in the sixth Eaton Vance Investor Survey agreed with these views. The majority of investors voted have a positive view of share companies (78 per cent), viewing themselves as predictable cash generators and viewing shares as a symbol of financial strength.
"There has been a dramatic change in the selection of investors from an emphasis on growth investment to a more focused investment approach," he said. Richardson. “In the 1990's, investors preferred reimbursement companies — which increased the reported earnings per share.” As the results of the Eaton Vance study reveal, the majority of private investors (57 percent) now say they prefer regular quarterly profits rather than buying stocks (23 percent) or special shares (8 percent).
According to Mr. Richardson, "Profits are back in popularity, and value investments have come from the doghouse."
Eaton Vance Corp. is a Boston-based investment management firm with shares trading on the New York Stock Exchange under the EV brand. Eaton Vance and its subsidiaries have managed assets for more than $ 113.3 billion as of January 31, 2006, in more than 100 investment companies, as well as individual and institutional accounts, including those of companies, hospitals, retirement plans, universities, foundations and trusts.
Penn, Schoen & Berland Associates, Inc. is a fully-fledged strategy voting firm based in Washington, D.C. and market research.
Before investing in any Eaton Vance Fund fund, prospective investors should carefully consider the Fund's investment objectives, risks, costs and expense. The Fund's current prospectus contains this and other information about the Fund and is available from your financial advisor. Read the prospectus carefully before investing or sending money.
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