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MARKET COMMENT
By
Sam Goldwyn may well have had City analysts in mind when he remarked 'Forecasts are dangerous, particularly those about the future'. In the unpredictable world of business, stock markets and life in general, when the ink dries on an earnings estimate, something always happens to prompt a 'revision'. The teenage scribblers that follow Barclays (LSE: BARC) will no doubt be re-assessing their projections today. The bank confirmed that its 2003 profits will be 'somewhat better' than the current market consensus of £3.7b, with earnings per share of around 44p probably now on the cards. Yet back in March, predictions of 38p per share for 2003 and 39p for 2004 were commonplace. So how can a bunch of brainy brokers following one of Britain's biggest banks have their predictions so blighted in just eight months? Oh yes -- banks are sensitive to the economy and the stock market, both of which confounded the experts by doing well over the summer. Steadier businesses such as Rentokil Initial (LSE: RTO) can also upset City projections. The rat catcher provided shareholders with an update this morning, which indicated pre-tax profits were up 5% in the first ten months of the year. However, company followers had been expecting 7% growth for 2003 and the shares promptly fell 5%. With profit forecasts proving a bit of a minefield, it makes sense to focus on dividend predictions. Blue chip boardrooms always do their best to maintain a 'progressive dividend policy', with Barclays and Rentokil renowned for their strong and growing payouts in particular. Thus in March, dividend forecasts for Barclays were 20.1p for 2003 and 22.0p for 2004. But even with those earlier profit predictions in tatters, today's payout estimates remain similar, at 20.3p and 22.3p. And it's the same with Rentokil. Eight months ago, dividend estimates of 6.0p and 6.5p were given for 2003 and 2004. Now the consensus figures are 6.1p and 6.7p. When it comes to forecasts about the future, today's evidence suggests dividend predictions -- and not earnings estimates -- are the more reliable.