In the ongoing low-yield environment, yield-hungry investors have bid up dividend stocks for higher returns. Despite concerns that the asset category may be overpriced, high-quality dividend exchange traded funds may still have more room to run.
Tony DeSpirito, co-manager of BlackRock Equity Dividend Fund, argued that stocks with a good record of raising dividends may continue to improve, reports John Waggoner for InvestmentNews.
“The decade of the 1990s and the run-up to the tech-bubble didn’t reward quality and yield, but since the tech-bubble top, this style has earned a consistent return premium,” Scott Opsal, research director for the Leuthold Group, said.
While bond-esque, dividend-paying stocks like utilities have seen valuations rise in light of the depressed fixed-income yields, DeSpirito contended that companies with a record of raising dividends are more attractive than usual since they issue their dividends cautiously. These dividend payers typically include higher quality companies that are more cautious when raising dividends since they would do so without stretching their balance.