Not much worked in equity markets last year, but there were corners of less bad and overt strength. Among the 2022 stock market winners were high-dividend equities and the related exchange traded funds.
Take the case of the VanEck Morningstar Durable Dividend ETF (DURA). DURA, which tracks the Morningstar US Dividend Valuation Index, lost just 0.77% in 2022, clearly comparing favorably to the 19.48% shed by the S&P 500.
Add to that, the VanEck ETF finished 2022 with a dividend yield of 3.83%, or 218 basis points ahead of the S&P 500. Of course, past performance isn’t a guarantee of future returns, but some market participants are bullish on high-dividend stocks for 2023, as highlighted by a recent CNBC survey of professional investors.
CNBC “polled about 400 chief investment officers, equity strategists, portfolio managers and CNBC contributors who manage money about where they stood on the markets for the new year. The survey was conducted over the last week.”
Interestingly, the survey’s respondents are positive on both growth stocks and high-dividend names as 2023 ideas, but 31% are looking to buy high-payout names while 19% are eyeing mega-cap tech stocks. Energy stocks are most favored at 41%. That’s somewhat relevant to investors mulling DURA because 3.37% of the ETF’s 63 holdings hail from the energy sector.
“Thirty-one percent of the investors polled said they will concentrate on high dividend, health care and financial stocks — more defensive and stable areas that garnered support in 2022 as recession fears loomed,” added CNBC.
The healthcare sector, which was also less bad last year, accounts for nearly 30% of the DURA portfolio. Importantly, that group has been one of the leading sources of S&P 500 payout growth in recent years and has the financial resources necessary to keep that trend up well into the future.
Financial services stocks, which account for 8.11% of DURA’s lineup, disappointed last year considering that the Federal Reserve raised interest rates seven times. However, the sector remains a prime value destination — relevant because value stocks beat growth last year — and has ample runway to continue boosting dividends.
Some market observers are also constructive on industrial stocks to start 2023, citing the sector’s low beta reputation and dividend prospects, among other factors. That could be good news for DURA investors because that sector is the ETF’s fourth-largest exposure at 10.32%, according to VanEck data.
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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.
