Perspectives Blog

Building wealth through dividend investing

February 18, 2014

We believe a disciplined dividend strategy that focuses on rising dividends produced by high-quality companies can help investors build wealth over time. Historically,  dividends have been an important component of total return, with the best opportunity for total return in the stocks of high-quality companies that can sustain and grow their dividend over time. Higher quality stocks act to mitigate risk and offer downside protection during time…

Has dividend investing lost its luster?

Columbia Management, Investment Team | May 12, 2014

…ples, share buybacks, an alternative form of capital return to shareholders, are relatively less attractive than dividend increases at the margin. In our opinion these factors support strong dividend growth in the next few years. We believe the drivers that have resulted in historical stock market outperformance from high-yielding equities remain intact. Briefly, valuations of high-yielding stocks benefit from the capital discipline dividends imp…

A less certain world favors high-quality stocks

Philip Dicken, Head of European Equities, Threadneedle International Ltd | October 6, 2014

…d the bond proxies to perform so well this year. We surmised that some of the more domestically-focused European stocks would outperform as the economic recovery became more embedded — a reasonable assumption given what has happened in other developed markets in recovery mode, such as the UK Therefore, we started 2014 with a bias towards higher-quality, domestically focused stocks in areas including financials, transport and leisure, media, and s…

Are financial markets priced for secular stagnation?

Columbia Management, Investment Team | December 15, 2014

…we believe that corporate credit markets are not priced for a protracted period of secular stagnation. Moving to stocks we might expect that the Japanese script is pretty clear: when secular stagnation arrives, sell everything and don’t look back. But the valuation of Japanese stocks in 1989 was a world away from the valuation of U.S. stocks: the price/earnings ratio of the Topix index was 60X in 1989, and this compares to a trailing price/earnin…

2015 Outlook — Same song, slightly different arrangement

Jeffrey Knight, CFA, Global Head of Investment Solutions and Asset Allocation | December 15, 2014

…ach asset, the expected return (proxied by yield-to-maturity for bonds and by implied cost of equity capital for stocks) is plotted against the product of volatility and correlation to world equities. By incorporating correlation, we give credit to assets that offer a diversification benefit by adjusting the asset’s volatility downward as long as it has a correlation of less than one to world stocks. We believe this adjustment helps in the direct…

Thoughts on navigating market volatility in today’s technology markets

Rahul Narang, Senior Portfolio Manager | April 28, 2014

…and Internet. In recent weeks there has been a dramatic shift in alpha generation from hyper growth technology stocks to more value-oriented names. We can attribute this to a number of factors: 1) improving economic data means a lower multiple for hyper growth stocks and higher multiples for value/cyclical names; 2) Fed Chair Janet Yellen’s reaffirmation of the taper; 3) geopolitical upheavals; 4) prime brokerage data suggests that hedge funds…

Flexible income strategies — Avoiding side effects from the Fed’s medicine

David King, CFA, Senior Portfolio Manager | August 11, 2014

…erate these cash hoards and create a situation where moderate earnings growth, combined with a moderately-rising dividend payout ratio, creates an excellent dividend growth profile for years to come. We believe this thesis is at play in at least one recently announced large merger in the healthcare sector. 2. YieldCos This title sounds gimmicky, and some companies yet to be born into this genre probably will be. However, the first few companies o…