In the search for income in a rising rate environment full of market volatility, with fears of recession looming on the horizon, investors are looking to reliable, high-dividend strategies, according to a survey from CNBC.
Of those polled were 400 CIOs, equity strategists, portfolio managers, and money managing contributors to CNBC, and when asked where they were most likely to invest now looking to the rest of 2022, 30% answered that they would invest in stocks that pay high dividends.
Image source: CNBC
Second-highest were financials, with the hopes that the bottom line for banks would profit from a raising rate environment.
“With rising rates and higher inflation, dividend strategies have had a strong outperformance in 2021 and year to date,” said Michael Hunstad, Ph.D. and head of quantitative strategies at Northern Trust Asset Management, on Advisor Perspectives.
“Despite this strong performance, dividend stocks remain relatively inexpensive with average price to earnings multiples of about 17 versus the equity market average of about 23. The recent surge in corporate earnings and profits have improved both dividend coverage and the capacity to grow dividends,” Hunstad explained.
Investing in Large-Cap U.S. Dividend Companies
The WisdomTree US Quality Dividend Growth Fund (DGRW) invests in large-cap U.S. equity companies that are growing their dividends and applies both quality and growth screens to securities. The fund seeks to track the WisdomTree U.S. Quality Dividend Growth Index, a fundamentally weighted index based on dividend projections for the next year, which screens companies for long-term growth expectations, return on equity, and return on assets.
The index is made up of the 300 companies from the WisdomTree U.S. Dividend Index that have the best combined rank of growth and quality factors mentioned above. The index is dividend-weighted on an annual basis so that it reflects each company’s aggregate cash dividend shares proportionately, with the highest dividend-paying companies weighted the heaviest.
Securities within the index are capped at 5% individually, and most sectors cannot make up more than 20% — information technology is one exception at a 25% limit, while real estate is the other at a 10% cap.
Top holdings include Apple Inc. (AAPL) at 5.28% weight, Johnson & Johnson (JNJ) at 4.93% weight, and Microsoft Corp (MSFT) at 4.72% weight. Top sector allocations are information technology at 23.70%, consumer staples at 19.23%, industrials at 17.80%, and healthcare at 17.08, with several smaller sector allocations. All data is as of March 30, 2022.
DGRW has an expense ratio of 0.28%.
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