Bolstering the case for quality investing, those other metrics include high returns on equity, stable dividend growth, robust cash flow, lack of financial leverage, sturdy balance sheets and strong management, notes MSCI.
“If we do see a split Congress and the gridlock barometer runs high, consider positioning portfolios a bit more defensively,” said SSgA. “This doesn’t mean going all to cash, but remaining invested with a defensive tilt in equities and overlaying tail risk positions from an asset allocation perspective. After all, US economic growth remains positive and US company profits are likely to grow above 20% for this quarter, the third quarter in a row.”
SDY holds firms that have a minimum dividend increase streak of 20 years. Moreover, SDY follows a yield-weighting methodology that allocates a larger weight toward those with higher yields, so the portfolio leans toward more mid-sized companies. While SDY mandates member firms have dividend increase streaks of at least 20 years, many of its 100-plus holdings have longer payout increase streaks than that.
For more information on the smart beta strategy, visit our smart beta category.