“Given the strong recent performance of high yielders, investors have raised concerns about excessive valuations. The data should allay these fears. More specifically, Utilities, Telcos, and REITs carry multiples of 17.3x, 13.8x, and 18.8x, respectively. The S&P 500’s P/E of 16.6x is exactly in line with the average of these three sectors. Each of these sectors trades at or below its 5-year average premium/discount to the S&P 500. This is the result of relatively mixed returns for high dividend stocks in preceding years,” according to an RBC note posted by Amey Stone of Barron’s.
Related: Best of Both Worlds With This Dividend ETF
Stocks with steady dividend yields reassure investors of a company’s strong financial health. Additionally, dividend-paying stocks typically outperform those that do not pay over the long haul, with less volatility, due to the compounding effect of dividends on the investment’s overall return.
For more news and strategy on the Dividend ETF market, visit our Dividends category.
iShares Select Dividend ETF
Tom Lydon’s clients own shares of DVY.