Three Reasons to Consider Dividend Growers
As global economic growth slows and US-China trade tensions drag on, Franklin Equity Group’s Nick Getaz and Matt Quinlan see signs that some investors may be turning their attention away from the high-growth stocks that have been popular during the recent US equity bull market. Against this backdrop, they explain why they think investors might want to consider “rising dividends companies,” or resilient companies with track records of dividend growth, during various market environments.
In the past three years, high-growth stocks, including some in the technology sector, have propelled the US equity bull market to record highs. These stocks have tended to perform better than the overall equity market, even during periods of geopolitical uncertainty.
However, during recent bouts of market volatility, we’ve seen signs that many growth-focused investors may be starting to view things a bit differently. As US-China trade frictions continue and global economic growth shows signs of slowing, the market seems to be more interested in stable companies with a proven track record of consistent dividend growth.
Often drawn from earnings, dividends are one way in which companies may choose to reward investors. They are typically cash payments made on a regular basis, such as quarterly or annually.
That said, not all dividend-paying stocks are created equal, and our strategy is not focused on high-dividend yield. As long-term investors, our strategy is to invest in rising dividends companies, or companies with a demonstrated track record of substantial and sustainable dividend growth, for some of the reasons listed below.1