Joining a growing chorus of investment commentators, HSBC Private Bank global strategy head Fredrik Nerbrand predicts that dividend payments from high quality firms will prove an increasingly attractive proposition for investors.

Nerbrand said the bounce in stock markets appears to have run its course with markets returning to a more normal pattern, where performance depends more on company earnings. As a result, he says, dividends are more important in driving shareholder returns.

In recent weeks, firms such as Sarasin & Partners have stressed the importance of owning dividend-paying firms, as they see cash-rich corporates, including those in geographical regions which have traditionally focused more on capital growth, as being more regular dividend payers in future.

“The most promising dividend strategy is to combine attractive dividend yields (but not necessarily the highest dividend payers) with important quality criteria, such as solid balance sheets and good earnings visibility (small risk of dividend cuts), below-average payout ratios that allow for potential payout increases, reliable historical dividend growth rates (sustainability) and attractive valuation relative to peers,” argues Nerbrand.

“Furthermore, as companies have established a floor in profitability following a phase of extended corporate cost-cutting and balance sheet repair, we believe that an improving earnings picture provides the necessary leeway for possible future dividend increases,” he said.

Commentators have argued that dividend payments as part of an equity income fund can be as robust as cash in certain respects but also pay a far superior return at a time of ultra-low global interest rates and fears of rising inflation.