The Dividend Dilemma – Should I Pay or Should I Grow Now?

Insights

The Dividend Dilemma – Should I Pay or Should I Grow Now?

MICHAEL LABELLA, CFA
Head of Global Equity Strategy

JOSH GRECO
Head of Advisor Business Development, Client Portfolio Manager

LILY SULLIVAN
Equity Strategist

OCTOBER 24, 2019

  • When investing for dividend income, investors have a difficult decision to make – a Dividend Dilemma, if you will.
  • Should investors seek a strategy comprised of companies that must achieve an annual dividend growth… or a strategy owning companies that pay a higher dividend today?
  • Each has benefits and unique (sometimes overlooked) characteristics that will impact portfolios and investor outcomes. 
  • The analysis below is provided to help investors analyze the differences between dividend strategies… should I pay or should I grow now?

1 Michael J. LaBella is Head of Global Equity Strategy at QS Investors. Josh Greco is Head of Advisor Business Development, Client Portfolio Manager at QS Investors. Lily Sullivan is Equity Strategist at QS Investors. Source: Bloomberg, NASDAQ, Russell 3000 Index, QS Investors. Dividend Payer is represented by the QS Low Volatility High Dividend Index. Dividend Grower is represented by the NASDAQ US Dividend Achievers Select Index. From December 2004 – September 2019 based on monthly returns. Trailing Dividend Yield is calculated as the ratio of net dividends per share and closing price, multiplied by 100 as of the date of the analysis. Harmonic weighted average approach is used with all underlying components.

Source: Bloomberg, NASDAQ, Russell 3000 Index, QS Investors. Dividend Payer is represented by the QS Low Volatility High Dividend Index. Dividend Grower is represented by the NASDAQ US Dividend Achievers Select Index. From December 2004 – September 2019 based on monthly returns. Sector Exposure based on GICS Sector Classification using the following assumption: Non-Cyclical Sectors (Consumer Staples, Health Care, Utilities, Telecommunications) and Cyclical Sectors (Consumer Discretionary, Energy, Financials, Real Estate, Technology, Industrials and Materials).

The QS Low Volatility High Dividend Index (the “Index”) is based on a proprietary methodology created and sponsored by QS Investors, LLC. (QS), the sub-advisor. The methodology calculates a composite “stable yield” score, with the yield of stocks with relatively high price and earnings volatility adjusted downward and the yield of stocks with relatively low price and earnings volatility adjusted upward. The composition of the Index after annual reconstitution and rebalancing may fluctuate and exceed the aforementioned limits due to market movements. The components of the Underlying Index, and the degree to which these components represent certain sectors and industries, may change over time.

Important Information
This material is intended for informational purposes only and it is not intended that it be relied on to make any investment decision. It was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. It does not constitute investment advice or a recommendation or an offer or solicitation and is not the basis for any contract to purchase or sell any security or other instrument, or QS Investors, LLC to enter into or arrange any type of transaction as a consequence of any information contained herein. QS Investors, LLC does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this document. Except insofar as liability under any statute cannot be excluded, no member of QS Investors, LLC, the Issuer or any officer, employee or associate of them accepts any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this document or for any resulting loss or damage whether direct, indirect, consequential or otherwise suffered by the recipient of this document or any other person. The views expressed in this document constitute QS Investors’ judgment at the time of issue and are subject to change. The value of shares/units and their derived income may fall as well as rise. Past performance or any prediction or forecast is not indicative of future results. This document is only for professional investors. Investments are subject to risks, including possible loss of principal amount invested.

QSCR18924

 

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Related Investment Vehicles:

  • Legg Mason Low Volatility High Dividend
  • QS Global Dividend

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