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from Breakingviews:

Tesco should cut its dividend

By Robert Cole

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Shareholders ultimately lose out when too-high payouts prevent companies from responding well to problems. Right now, Tesco needs all the financial flexibility it can muster. Its current dividend is dangerously constricting.

In pure financial terms, the UK-based supermarket has the wherewithal to maintain the payment at current levels. The last 14.76 pence annual dividend was twice covered by underlying earnings per share, and the 1.2 billion pound payment was roughly the same as the free cashflow, HSBC calculates. If profit falls short, Tesco could cut capital expenditure – currently 2.5 billion pounds a year. And it could easily borrow more. Trading profit in 2014 was nearly eight times the interest bill.

But renewed commitment to the dividend would burden the company at a bad time. It needs to cut prices to fight off threats from discounters. Investments in infrastructure and logistics are required if Tesco is to maintain leadership in convenience stores and online shopping. There could also be writedowns on property values of out-of-town stores.

from Breakingviews:

Latest blunder hits StanChart where it most hurts

By George Hay

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

Standard Chartered’s latest blunder hits the UK bank where it hurts most. New York State’s Department of Financial Services has slapped a $300 million fine on the emerging markets-focused lender for compliance lapses. It reinforces the disturbing impression that StanChart’s top brass aren’t on top of things.

from John Lloyd:

‘Braveheart’ they’re not. What’s Scotland’s problem with a United Kingdom?

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The collapse of empires has been regarded as a good thing for at least a century, much strengthened by U.S. president Woodrow Wilson’s efforts at the Versailles Peace Conference after World War One, where he sought to inscribe into international practice and law the right of all peoples to achieve a national state.

The lifting of the incubus of Soviet Communism in 1991 from the states of Central and Eastern Europe was opposed only by a few worried political leaders and rather more dispossessed Communists, but even they either put on a smile or kept their heads down. George H.W. Bush, in the White House when the Soviet center would no longer hold, tried to stem the communist tide by embracing his new friend, Soviet President Mikhail Gorbachev, to avoid chaos in the east -- in vain. Nationalism, which the Soviet Union’s ideologists had regarded as one of the cardinal sins and had filled the gulags for decades with those suspected of harbouring its sentiments, triumphed.

from Breakingviews:

BHP spin-off won’t appeal to commodity players

By Swaha Pattanaik

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

BHP Billiton plans to spin off unwanted parts of its business into a new company. Aluminium and nickel, whose prices are rising, are among assets which will be parked in the yet-to-be-named organisation. A potentially more focused and nimble mining company might sound like an ideal vehicle for investors who want to follow a rising market. Not so fast.

from Breakingviews:

German yield curve is the safest one to play

By Swaha Pattanaik

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

 Bull flattening may sound like an exotic, and rather cruel, sport, but for today’s bond investor, it describes an investment opportunity. Some juicy bear flattening is also available, although it comes with somewhat more risk.

from Breakingviews:

Dollar set to take pound’s strong currency title

By Swaha Pattanaik

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Sterling emerged as the currency market strongman over the past year because investors grew increasingly confident the UK would be the first big economy to raise interest rates. The dollar now looks set to wrest the title from the pound.

from Edward Hadas:

Not all banks are alike

By Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Competition is fierce for the Bankers’ Bad Behaviour Award. Rate-rigging, client-fleecing, dishonest documentation, reckless trading and exorbitant pay were all widespread before the 2008 financial crisis, and faulty practices have proven remarkably persistent. It sounds like there is something wrong with all banks. The ethical problem, though, is not universal.

from Breakingviews:

Sky Europe transforms BSkyB investment case

By Quentin Webb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

“British” Sky Broadcasting is no more. The group is buying sister Sky units in Germany and Italy for at least 4.9 billion pounds ($8.3 billion) in cash from Rupert Murdoch’s Twenty-First Century Fox. That transforms the investment case for the UK’s top pay-television group.

from Breakingviews:

UK’s strong GDP has a soft centre

By Ian Campbell

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Fly the flag. The headlines will be about the solid milestone. The UK finally replanted its flag on its 2008 GDP growth peak, three years after Germany and the United States reclaimed theirs and after a mere five years of ultra-low interest rates. But the landscape – the details of the second-quarter GDP – has its uncomfortably rocky side.

from Breakingviews:

Murdoch calls on European outposts for Time Warner

By Quentin Webb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Rupert Murdoch is calling on European outposts to help in his pursuit of Time Warner. The media mogul’s Twenty-First Century Fox is poised to sell its Sky pay-TV arms in Italy and Germany to Fox’s UK affiliate British Sky Broadcasting. There’s strategic logic to the asset shuffle and the proceeds could help sweeten his $80 billion bid for the owner of CNN and Warner Bros. How Murdoch treats non-Murdoch owners is the linchpin.

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