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Dividend stocks look attractive with a volatile year that nets measly returns expected ahead

https://www.cnbc.com/2020/01/11/wall-street-strategists-recommend-stable-dividend-paying-investments.html

Dividend stocks look attractive with a volatile year that nets measly returns expected ahead

KEY POINTS
Unlike growth stocks, dividend stocks typically don’t offer dramatic price appreciation, but they do provide investors with a steady stream of income.
This type of strategy can bode well for investors in a much riskier year ahead grappling with Middle East unrest and a U.S. presidential election.
Wall Street market analysts largely see much more modest returns in 2020 following a historic run last year. The average year-end target for the S&P 500 comes to 3,345, a measly 2% gain.
A slew of banks including Goldman, UBS and Bank of America started advising clients to shift to dividend-paying stocks and strategies to hedge against rising risks and seek outperformance.

Comments

  • edited January 13
    Hi @johnN.

    John I want to thank you for your continued effort to post articles for members and viewers to read. Keep it up and you will become ... Linkster, Jr.

    Now for my comment about this article. Old_Skeet has two sleeves of dividend paying mutual funds. Both sleeves are found in the growth & income area of my portfolio with one being my domestic equity sleeve and the other one being my global equity sleeve.

    My domestic equity sleeve consist of ANCFX, FDSAX, INUTX and SVAAX. This sleeve has a dividend yield of 2.95% with a 1 year total retrun of 17.78% and a 5 year total return of 8.36%. The P/E Ratio for this sleeve is 14.3.

    My global equity sleeve consist of CWGIX, DEQAX, DWGAX and EADIX. This sleeve has a dividend yield of 2.17% with a 1 year total return of 22.75% and a 5 year total return of 8.06%. The P/E Ratio for this sleeve is 16.35.

    Why two sleeves?

    From reivew one is more domestic and the other takes a global perspective including some emerging market exposure. With this, there can be, at times, advantages for one over the other. Currently, the domestic sleeve has the higher divided yield; but, the global equity sleeve has the better 1 year performance while they both share about the same 5 year returns. In addition, these two sleeves add some diverisfication to the overall portfolio and combined they account for about 15% of the portfolio. I'm thinking that the domestic sleeve will be the better performer this year due to it's lower P/E Ratio which allows for some good price expansion. Also, it holds a good amount of energy stocks which I feel have some good upside associated with them.

    Once, I build out INUTX I've been thinking of adding VYCAX to the sleeve. In addition, DWGAX is not yet fully built as a sleeve member and is under construction.
  • edited January 13
    I agree withe the basic premise of the article but then maybe because I'm a dividend growth investor I tend to be biased. According to Ned Davis Research, from 1972 to 2018 dividend growth stocks outperformed the broader market by 2.3% CAGR and with 12% less volatility. If one invests in a company with sufficiently stable cash flows to generate a long dividend growth streak (e.g. Dividend Aristocrat) they are less likely to bail during times of increased market fear. I am in it for the income and patient enough to buy these stocks when they get trashed for no discernible reason. While no dividend stock is a true bond alternative, quality dividend growth stocks (like the famous aristocrats) tend to have much lower volatility over time. Volatility, dividend growth, quality, and value are four proven alpha factors that have beaten the market over the long term.

    I was intrigued enough to seek out the Goldman Sachs basket and found this article below. Apologies if it's been linked before.

    Goldman Basket Possibilities

    Edit: and I suppose I should back up that Ned Davis statement with a reference.

    Long Term Performance of Dividend Paying Stocks
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