Dividend stocks are always relevant, but some of their luster was lost last year amid a wave of cuts and suspensions amid the onset of the coronavirus pandemic.
That situation improved late in 2020, and with dividends roaring back, advisors may want to consider the Global Dividend Model Portfolio, which is part of WisdomTree’s Modern Alpha series of model portfolios, as an avenue for meeting clients’ income needs.
“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.
With interest rates low and dividend growth improving, payouts are taking on renewed importance for income-starved clients.
“The notion of using dividends in retirement, either as a way to complement other financial assets, or perhaps rely on them for an even larger percentage of income, is drawing plenty of interest these days,” reports Lawrence Strauss for Barron’s. “Yields on many traditional income investments are now near historical lows, and the onus increasingly is on individuals to secure their postcareer income. The strategy has spawned something of a movement, encompassing investors of all ages and levels of sophistication. There are Facebook groups devoted to the topic along with blogs, newsletters, books, and various other platforms.”
A Model Portfolio for Dividend Dynamos
The WisdomTree model portfolio emphasizes quality and dividend sustainability, traits that are meaningful in any climate. Investors should consider quality dividend growth stocks that typically exhibit stable earnings, solid fundamentals, strong histories of profit and growth, commitment to shareholders, and management team conviction in their businesses.
“A key force behind the burgeoning interest in retiring on dividends is ultralow interest rates. Even though the 10-year U.S. Treasury yield has touched 1.7% in recent days, passing the S&P 500’s average yield, interest rates remain low by historical standards,” according to Barron’s. “Other traditional income—generating investments like certificates of deposit and corporate bonds are also trading with historically low yields.”
The model portfolio’s focus on a company’s financial health is particularly relevant at a time when many companies took on debt simply to survive in the first half of 2020.
“As such, these companies generally show some resilience during market downturns. Further, dividend-growth stocks can provide some inflation protection,” concludes Morningstar.
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.
