Fund managers have a message for the boards of public companies, and it's straight out of Jerry Maguire: Show me the money! More than half the world's professional money managers are now pushing public companies to ramp up their dividend payouts, according to a new survey from Merrill Lynch ( MER). They even want those companies to borrow the cash, if necessary, to do it. By the numbers: 53% surveyed in January want companies to give back more cash to shareholders, up sharply from just 44% a month ago. Those who would rather see companies invest that cash in growing their businesses dropped by the same amount. Merrill's monthly survey is the best and most comprehensive of its kind, including more than 200 money managers from around the globe. And this looks like the must-know insight from the latest 30-page report. The reason? Three and a half years of profit growth have left a lot of companies on the stock market, here and overseas, awash with cash. They've been raising their dividends, but profits have been rising a lot faster. And for U.S. investors, there's a kicker. The tax cut a few years ago makes dividends more attractive, because now you just pay up to 15% tax on them. It's a subject close to the heart of Eaton Vance ( EV) fund manager Judy Saryan, who sits in a sunny office overlooking Boston harbor and scours the world for companies likely to send their shareholders bigger checks. "There are lots of good dividend growth stories out there, some right here in the U.S. and some in Europe," she says. "A lot of them are large-cap companies, because they tend to have a lot of cash and they tend to be a little less leveraged."
The number to watch is the dividend payout ratio -- the percentage of profits that companies hand back to their investors. Saryan calculates that, across the U.S. market, it's just 31%. And that's barely risen over the decade because profit growth has so outstripped dividends. "We're really almost right back where we started from in 2000," she says. Hardly anyone in the stock market knows their history anymore, so there are two important points to mention. The first: Back in the dim and distant past, before the irrational exuberance of the 1990s, the payout ratio on Wall Street was routinely well above 40%. So there's a lot of room for payouts to rise. The second: Over the long term, investors have traditionally made the bulk of their profits from dividends rather than simply from rising prices. The caveat to all this is that money has been pouring into dividend income funds of all types for at least a year, sending their prices rocketing. So this may be a time to dip your toe in the water, rather than to dive in headfirst. A case in point is Saryan's closed-end fund, ( ETO) Eaton Vance Tax Advantaged Global Opportunities , which issues a fixed number of shares and trades throughout the day on an exchange as a stock does. At times in the past three years, it's been possible to buy this fund at a bargain-basement 14% discount to its underlying assets. Right now, the discount is less than 2%. (Saryan also co-manages the ( EDIAX) Eaton Vance Dividend Income and ( EADIX) Tax-Managed Dividend Income funds.) As often, finding good investments and finding the right times to buy are separate matters.