The party is over, time for a sensible approach to dividends

John Abernethy, Chief Investment Officer of Clime Investment Management, says investors should be taking a long-term view, focusing on companies that have the cash flows to support their dividend over the cycle. “The evidence in the market is quite clear, have a long-term growth strategy, well funded by internal cash flows, and the market will reward you. Don’t listen to short-term speculators.” For investors focussed on cash flows, he says they shouldn’t be investing in companies who must pay back bondholders before they can pay a dividend. While the banks say they don’t need to cut dividends, he thinks it’s important they start retaining profits and stop issuing hybrids and new shares. If they do nothing, they’ll end up like BHP and be forced to cut. “I don’t think banks are to provide yield to support pensioners. They’re there to grow dividends over a long period of time; not only for current shareholders, but for future shareholders.” Watch the full interview: