Stocks Win and Credit Loses as Companies Cater to Shareholders
- Falling bond yields can tempt companies to boost leverage
- Investors see shareholder-friendly moves as a risk for credit
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For much of the past year, investors have been pressing US companies to cut debt levels and shore up their balance sheets as borrowing costs have risen. Those days may be ending, though, and the results could hurt corporate debt while boosting stocks.
Last month, about a third of the S&P 500 companies that reported earnings ended up raising their dividends, according to credit strategists at JPMorgan Chase & Co. With bond yields broadly having fallen since October, companies are looking at borrowing to help boost returns for shareholders. Acquisitions, often funded with debt, are also picking up after two slower years, the strategists said.