More recently, though, the aristocrats’
performance has turned.
Over the last 18
months, they have underperformed by about
one-quarter. One reason for this is that investors
have begun to realise they have reached
capacity in the amount of debt they can take on
to finance both outsized dividends and share
In the decade before the crisis, the
net debt of these stocks was a steady one-third
of ebitda. Since then, net debt has more than
tripled as a proportion of earnings.
in leverage to fund capital returns can only
happen once, yet investors valued these stocks
on the basis it could persist.