Dividends. They are one of the first figures investors look
for when they believe there is not enough value opportunities in the equities
market.
At the moment, we are currently seeing dividend levels that have not
been reached in a very long time. The S&P indicated that the quarterly
dividend amount in 4Q15 represented the second largest dividend total in at
least ten years.
On the other hand, the dividend growth rate actually fell to its
lowest point since 2011.
"Dividends. They are one of the first figures investors look for when they believe there is not enough value opportunities in the equities market. "
When valuations are uncertain and investors find it too
risky to bet on a company’s growth alone, dividends are usually sought in order
to ensure a safer return. Many companies even continue disbursing dividends,
regardless of how the company is doing financially; simply to maintain
investors’ faith in the company. For instance, even though commodities took a
big hit in 1Q16, only 12 S&P 500 companies cut or suspended their
dividends. However, 919 companies in the U.S. equities market increased their
dividend in 1Q16, which was actually 8% lower than during 1Q15.
Though dividend growth is not increasing at the same rate it
was just a few years ago, they are still very attractive, especially among more
conservative investors or investors who would like to hedge away some of the
risk from other investments.
With interest rates remaining at low levels and
thought to remain as such for the time being, dividend rates are providing
better returns than government bonds. Though this has become somewhat of a
norm, it was not so almost a decade ago. Back then only 5% of stocks in the
S&P had higher dividend yields than the 10-year Treasury yield. In the last
few years this number has jumped to 65%. At the moment, the S&P dividend
yield has about a 20% higher return than the 10-year Treasury. And with
dividend yields predicted to stay at current levels for the next couple of
years, dividend paying stocks should continue to remain popular among
investors; so long as interest rates remain near their current lows as well.
Clicking the Like button on various social media platforms, such as LinkedIn, Facebook, etc. does not constitute a testimonial for or endorsement of Redmount Capital Partners LLC or any Investment Advisor Representative. “Like” is not meant in the traditional sense. Posts must refrain from recommending investment advisory services or providing testimonials for our firm, since they are strictly prohibited. Please understand that we are required to delete such posts, since this is a regulatory requirement.
