As bond yields begin to compete with equities, we recommend an ecumenical approach to equity income and growth in dividends.
One of the major impediments to using stocks for yield has been the earnings recession over the last five quarters. The continuation of that trend would have undermined the stability of the dividend payout.
The market, however, has now withstood the effects of a stronger dollar on multinational earnings and withstood the energy sector’s adjustment to oil at $50 per barrel. And the S&P 500 is finally growing earnings again, year over year.
Read on for a summary of their analysis, or view the entire document here.
An increase in diversity in the equity-income universe is a welcome development for investors seeking balanced portfolios of dividend-paying stocks that offer more long-term growth potential and less sensitivity to rates.
- More industrials and information-technology stocks now pay a dividend, which in turn decreases the importance of traditional income-paying stocks such as utilities.
- Growth companies also are more likely to pay a dividend now than in years past.
- Consistent dividend growers have shown the resilience of their businesses and capital structures through business cycles and have the potential to outperform when uncertainty increases and equity markets decline.
- The rising payouts and strong business models of these dividend growers can help tremendously in the effort to combat the inflation that can come with increased economic growth and the volatility that can come with political and economic uncertainty.
For a more in-depth analysis, including what a Republican-led Congress and decrease in corporate tax rates may mean for earnings, download the complete commentary. Or review Lord Abbett's 2017 Global Investing Outlook.
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