Dividend-based (or dividend investing) investments have always been in the investment community. In fact, they are playing an increasingly important role in the client portfolio in response to demographic and social trends (rather than investment trends). Due to the aging of the population and the decline of traditional retirement income solutions (such as annuities) in many parts of the world, investment income is becoming increasingly important. retired. In this article, we will consider the reasons why investors can adopt dividend strategies, as well as the advantages and disadvantages associated with dividends.
We are also exploring the unique characteristics of dividend growth investing in a high-income stock portfolio, as well as the various approaches available to investors who want to focus on the revenue component of their portfolio. The expert believes that dividend strategies are suitable for investors who want to receive income from their investments, whether through a comprehensive combination of stock managers or a multi-asset solution. However, income-oriented approaches that generate revenue are not the same.
According to financial theory, investors should not distinguish between a company that currently offers a high dividend, but low growth in the future, and a company that currently offers a low dividend, but strong growth in the future (provided that investors are rewarded) by risks associated with this future growth). Full return approaches tend to take this view. However, for some investors there is a difference. A strategy that requires a certain level of dividends limits the opportunities that the portfolio manager can take. If the investor attaches little importance to the form of return (capital gains or dividends), the requirement of dividends will be an unnecessary restriction. In general, it is preferable to reduce the number of restrictions placed on the portfolio manager for a given mandate. We recognize that most approaches place some restrictions on more targeted placements.
However, with simply safe dividends-based strategies, these restrictions often come from external factors such as marketing initiatives, rather than from deep investment principles. That’s why, in the words, many income-oriented equity strategies are not investment strategies of the highest order. However, decisions regarding stock returns are relatively easy for investors to understand and offer transparent growth and returns. In our opinion, dividend-based approaches – which have minimal restrictions, which support a philosophy of investment that favors high-income securities or where high returns are a side effect of the process used (rather than an “explicit goal) – are more attractive. In addition, characteristics that are typically associated with dividend-oriented investments, such as value, strict discipline of capital, and low volatility, are factors that have long-term benefits for investors.
Dividend or income-based strategies vary greatly depending on their approach. However, they have some typical features that may be useful to investors. The most obvious of these features is that the dividend yield of the portfolio exceeds the market (i.e., reference). However, the level and stability of incomes vary depending on markets and investment strategies. Below are three other general characteristics of high-return equity strategies that can be attractive and attractive to investors, but, most importantly, vary greatly depending on their approach.
Cost: Dividend yield is one of the valuation metrics commonly used by investors to search for low-cost securities and use the “premium for value” as a strategy for high dividend yield. generally cost-based general characteristics (e.g., low price to market or book to book ratio, two accounting relationships often used to determine if security is undervalued or overvalued). However, this is not always the case, especially if the strategy is specifically aimed at high income.