Siemens, a bellwether of the euro zone's largest economy, signalled its confidence today by proposing a sharp rise in its full-year dividend and forecasting growth next year.
The company, whose products range from high-speed trains and wind turbines to hearing aids and light bulbs, is planning a dividend of €2.70 per share, the first increase since 2007. The dividend has been flat at €1.60 per share every year since then.
The new payout to shareholders is above the highest forecast of €2.40 in a Reuters poll of analysts and exceeds the poll average by nearly half.
"With our new dividend policy, we're providing long-term investors with an additional incentive to invest in Siemens," chief executive Peter Loescher said as Europe's biggest engineering conglomerate released third-quarter earnings.
Siemens, which has never published a dividend policy before, said today its future dividend payout ratio will be 30-50 per cent of net income.
"The dividend signals confidence in the future. It also means the company will now link dividend payment with profit, which means it can also be cut in the future," said analyst Theo Kitz of Merck Finck.
The company said operating profit at its three core businesses fell to €1.1 billion in the fiscal fourth quarter, down 45 per cent from the year-earlier period.
The fall was still less than the average forecast of a 59 per cent decline.
Siemens expects profit from continuing operations in the current fiscal year to September 2011 to grow by 25-35 per cent, with new orders improving significantly and organic sales returning to moderate growth.
Investor attention shifted to the dividend and the company's new medium-term targets following Siemens' trading update for the July-September period, released on September 27th.
Quarterly growth was driven by its bread-and-butter industry sector, whose industry automation, drives technology and other short-cycle units profited from factories cranking up production in Asia and Germany.
It said it expects emerging markets to expand considerably faster in the years ahead than their industrialised counterparts and to contribute a growing proportion of sales.
Emerging markets account for 30 per cent of revenue now, compared with 19 per cent five years ago.
Siemens is the last company to report in its sector, following consensus-busting quarterly results of Swiss rival ABB , which said it expected the positive trend in short-cycle business to continue in 2011.
Reuters