* Infrastructure, luxury goods sectors to grow in 2011
* Equity valuations attractive, company balance sheets good
* High dividend paying companies expected to benefit
LONDON, Dec 9 (Reuters) - Infrastructure, luxury goods and food and beverage equities are expected to post double-digit growth in 2011, while high dividend paying firms will benefit from more demand for yield, Distinction Asset Management said.
"Stocks have a number of factors working in their favour in 2011. Equity valuations remain undemanding and are much more attractive than bonds. The corporate world has a much better balance sheet than Western sovereign nations and households," it said in its 2011 Global Macro and Multi-Asset Outlook report.
"Cost cutting and a stronger-than-expected revenue in 2010 has driven very strong profit growth. These strong results have led to 2011 forecasts rising significantly," the report by Ana Armstrong and Patrick Armstrong said.
Distinction said companies involved in food products and high-end branded luxury goods will continue to exhibit "tremendous" growth, while infrastructure will remain a major theme for capital allocation by pension funds.
"The stability of earnings and high yield from infrastructure companies is every attractive, and we expect earnings will grow in excess of inflation for the next decade," the report said. It gave no details on specific stocks.
The asset manager said the gap between equity earnings yield and bond yields were at all time highs and high dividend paying companies will benefit from investor demand for yield and a rotation out of bonds into high yielding equities.
"We also expect capital structure arbitrage -- where companies take on debt to buy their shares back as the interest on their debt is much less than dividend yield."
The report said that 2011 was expected to be characterised by a continued global economic recovery and rapid growth in many developing countries will be fuelled by accommodative interest rate policies in the Western countries.
"We expect interest rates will remain near zero in the major Western currencies throughout 2011 and expect new announcements on QE as unemployment remains stubbornly high." (Reporting by Atul Prakash; Editing by Jon Loades-Carter)