Dividends

Dividends are a cornerstone of equity investing and over the decades they have produced a significant portion of the stock market’s total return.  Previous Leuthold research has identified a strong dividend influence on total returns for small and midcap companies.  Looking at S&P 500 constituents, we see that dividend growers outperformed companies that had flat or declining dividends – an expected outcome.  However, we also found that companies not paying dividends convincingly outpaced dividend payers.  This is contrary to the results in other market segments, but the explanation for this becomes apparent in the course of our research.

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Dividends are a cornerstone of equity investing and, over the decades, they have produced a significant portion of the stock market’s total return. Previous Leuthold research has identified a strong dividend influence on total returns for small and mid-caps; a client recently asked if we found the same effect in the universe of S&P 500 companies. Specifically, have S&P 500 dividend-payers outperformed non-payers, and, second, have dividend growers outperformed non-growers?

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The 2.00%-4.99% yield range is the sweet spot for yield investors from a risk/reward standpoint; while the other end of the spectrum (>5% yield) incurs too much risk for the fat payouts. Here we spotlight four ETF strategies that focus on dividend paying stocks.

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Last month we noted that current interest-rate expectations might indicate good timing for dividend investments; however, we strongly suggested being selective, and lean toward high-quality dividend payers.

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With multiple indicators flashing signs of an economic slowdown amid trade war uncertainty, investors are betting that an interest rate cut is on the horizon.

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Analyzing quarterly financial results and developing insights about upcoming periods is always difficult, but the first quarter of 2018 was unusually complicated.

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Are Utilities defensives, or are they interest rate plays, or both? We believe the driving influence fluctuates based on market conditions, specifically fear, and the desire for protection in down markets.

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Companies are returning cash to investors at a level never before seen. Does the historically high level of cash being returned to shareholders crowd out the use of cash elsewhere? One wide-spread concern is that by shelling out cash through dividends and share buybacks, companies are spending less on capital expenditures. Is that a real concern?

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Companies are returning cash to investors at a level never before seen. Counting dividend payouts and outstanding share repurchases, the amount of cash returned back to investors crossed the $1 trillion mark for the first time in January 2016 (based on trailing twelve-months’ total for the largest 500 companies, Chart 1).

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In the context of a low growth/low inflation environment, with the Fed taking its time to guide rates upward, fixed income type of investments may pale by comparison to dividend paying stocks.

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Timing a dividend strategy based on interest rate trends is futile. Look for quality of dividend payers for long-term success.

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We dusted off our research from 2011 on dividend growers. Somewhat to our surprise, we found fewer qualifiers this time, and a shift from Europe to Asia.

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The list of new lows is dominated by yesterday’s darlings, “bond-like” stocks. In particular, Utilities and REITs have been hammered. However, not all of the stock market’s high yielders have been trashed.

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A new dividend growth screen and another that additionally incorporates dividend growth at a reasonable price are explored.

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Methodology for the new screen and the Dividend Sustainability Rank are discussed in detail. Dividend strategies continue to gain popularity, as equity investors grapple for yield.

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Jim Floyd presents three screens looking for high (and healthy) dividend paying stocks. With bond yields so low, we believe there is opportunity in these types of stocks.

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This month Chung Wang examines historical performance of companies that increase or initiate dividends, as well as companies that are buying back stock. These stocks tend to significantly outperform.

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While most are content to make annual predictions at this time, leave it to Doug Ramsey to bite off an even bigger piece…predicting the next DECADE.

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There are four key decisions a company’s management has to make: Dividend Policy, External Financing, Capital Expenditure (Capex), and Research & Development (R&D).  We studied how the market rewards each of these management decisions.

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Dividends have been garnering a lot of attention of late. We provide a list of S&P 500 constituent dividend changes and examine the implications of dividend cuts from an historical perspective.

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