Interest rates are low and there’s not much to write home about regarding municipal bonds and Treasuries. Fortunately, dividend stocks are coming back into style.
Advisors can leverage that trend with the WisdomTree Global Dividend Model Portfolio.
“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 the issuer.
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.
The Dividend Outlook Is Improving
Last year, there were trouble spots for dividend stocks owing to the coronavirus pandemic, but that scenario improved in the back half of the year, setting the stage for a steady turnaround this year.
“Dividend cuts scared many investors away from equity-income strategies in 2020. We’re passed that now,” notes BlackRock. “Our analysis shows S&P 500 dividend cuts peaked in May and have since stabilized. We expect dividend growth to resume in 2021 as vaccine distribution and greater clarity in general give company managements the confidence to release excess cash in the form of dividends and buybacks.”
Enhancing the allure of the WisdomTree model portfolio is the outlook for interest rates, which will likely remain low for several more years.
“With interest rates around the world set to stay low for longer, company dividends are likely to provide better income than bonds for some time. In addition, companies can – and many often do – increase their dividends whereas bond coupons are fixed to maturity. Dividend growth that compounds over time is a compelling proposition in an environment of generation-low U.S. Treasury yields,” adds BlackRock.
WisdomTree’s Global Dividend Model Portfolio is also a strong idea for advisors serving long-term investors and for clients seeking higher shareholder yield – a metric that should improve as buybacks resume.
“Company buybacks of shares slowed dramatically in 2020. We believe activity should resume in 2021. Having that incremental buyer in the market pushes stock prices up and is good for the market overall. But buybacks are more accretive for value stocks, as buying shares at lower valuations (removing them from the market) has a greater proportionate impact on the value of the remaining shares,” concludes BlackRock.
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.
