At first glance, 2020 was unkind to dividend stocks, but much of that negativity was confined to the first half of the year. Overall, there were some encouraging signs for dividend payers and data confirm as much.
In fact, there’s is noticeable momentum for dividend stocks as of late, indicating WisdomTree Global Dividend Model Portfolio is a relevant consideration for advisors in 2021.
“This model portfolio seeks to provide capital appreciation and high current dividend income, through a globally diversified set of WisdomTree’s dividend income oriented equity ETFs. The model strives to deliver dividend income in excess of the global benchmark of equities,” according to WisdomTree.
Many of the ETFs in this model portfolio focus on the quality factor, of which a company’s ability to generate free cash and dividend growth and stability are integral tenants.
Positive Signs for Dividends
Domestic dividends perked up in the fourth quarter, indicating this model portfolio could be poised for a strong showing this year.
“Indicated dividend net changes (increases less decreases) for U.S. domestic common stocks increased $9.5 billion during Q4 2020, compared to a decline of $2.3 billion in Q3 2020, and a gain of $10.6 billion in Q4 2019,” according to S&P Dow Jones Indices. “For Q4 2020, aggregate increases amounted to $13.9 billion, up 64.2% from the $8.4 billion increase of Q3 2020 and up 15.7%, from Q4 2019’s $12.0 billion. Aggregate dividend cuts decreased 59.8% to $4.3 billion from Q3 2020s $10.8 billion in cuts, and was up 221% from the $1.3 billion in cuts for Q4 2019.”
Dividends are in demand as fixed-income investors face a lower-for-longer interest rate environment. The Federal Reserve is expected to maintain its near-zero interest rate policy to help push inflation up, bolster the economy, and lower the unemployment rate. The Fed has already stated it is willing to let inflation run higher to offset years inflation fell below its 2% target.
“Many companies have stabilized their operations and sales and are returning cash flow to the dividend market,” said Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices. Silverblatt continued, “some issues which had suspended their payments after the start of COVID, have resumed payments. The $13.9 billion in Q4 increases represented a 15.7% increase over the pre-COVID Q4 2019 period.”
For more on how to implement model portfolios, visit our Model Portfolio Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
