Dividend stocks encountered significant headwinds at the hands of the coronavirus pandemic in the first half of 2020, but data confirm things are looking up.
The Global Dividend Model Portfolio, which is part of WisdomTree’s Modern Alpha series of model portfolios, is an ideal for advisors looking to position client portfolios to capitalize on a refreshed dividend proposition.
“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.
The portfolio is levered to quality and payout growth, traits that are persistent. They’re also particularly meaningful in the current environment.
“Global dividend payments could rebound by as much as 5% this year, a new report estimated on Monday, after the coronavirus caused the biggest slump in payouts since the financial crisis more than a decade ago,” reports Joice Alves for Reuters.
A Promising Outlook for This Model Portfolio
As income-minded investors look for ways to bolster returns in a low-rate environment, various exchange traded funds can rise to the challenge.
Exposure to the value factor could be in play following rotation away from high growth, which has outperformed this year, to cheaper cyclical sectors. Value stocks tend to trade at a lower price relative to their fundamentals (including dividends, earnings, and sales).
“Companies’ payouts to shareholders plunged more than 10% on an underlying basis in 2020 as one in five cut their dividends and one in eight cancelled them altogether,” reports Reuters. “A total of $220 billion worth of cuts were made between April and December, based on investment manager Janus Henderson’s Global Dividend Index. But there are signs companies are beginning to reinstate at least some of them.”
Seven of the nine ETFs featured in the model portfolio are WisdomTree products spanning domestic and international equities, including emerging markets and small caps. The recurring narrative is that yield is hard to come by nowadays, but fixed income investors still have options.
“Banking dividends will be likely to drive the rebound in payouts in 2021, the report said, after the European Central Bank and Bank of England eased blanket bans for lenders on dividends and buybacks. These were imposed during the first wave of the crisis to prepare for a potential increase in bad loans,” concludes Reuters.
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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.