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On October 28, 2013, a Wall Street sign is seen outside the New York Stock Exchange in New York. Carlo Allegri/Reuters Reuters, NEW YORK, July 2 – With expectations that Treasury yields would remain low in the second half of the year, some investors are reconsidering companies whose dividend distributions are higher than those offered by government bonds. The ProShares S&P Dividend Aristocrats ETF, which tracks firms that have increased their dividends annually for at least 25 years, has up 14.3% this year, vs a 15.8% gain for the benchmark S&P 500. However, some investors believe these equities will be a strong bet in the coming months, as a more hawkish tone from the Federal Reserve and signs of peaked growth dampen expectations that Treasury yields will repeat their recent rise. The dividend yield on the S&P Dividend Aristocrats index is 2.15 percent, while the 10-year Treasury yield is 1.48 percent. The S& “The market will increasingly pay attention to companies that have the ability to increase payouts and present returns,” said Bob Leininger, portfolio manager at Gabelli Funds. According to Goldman Sachs, dividend payouts in the S&P 500 will climb by 6% this year and next, significantly above the 0.8 percent growth rate predicted by present prices. According to the business, 22 of the 57 companies that reduced or halted dividends in 2020 have restored or increased them, and another 19 will likely boost their payouts before the end of the year. After the Federal Reserve eased restrictions on dividends and buybacks, financial institutions are expected to lead the way in dividend increases, according to the report. UBS Global Wealth Management’s chief investment officer, Mark Haefele Goldman Sachs Group (GS.N), Morgan Stanley (MS.N), JPMorgan Chase (JPM.N), and Bank of America (BAC.N) said on June 28 that they were increasing their bonuses after passing the Federal Reserve’s stress tests, which assess how corporations would fair in a severe economic slump. According to expert projections, total buyback and dividend payouts from banking companies will likely exceed $130 billion. Leininger said he’s starting to focus on firms like Molson Coors Beverage Co (TAP.N), a brewer that discontinued its dividend last year but announced in April that it aims to restart it by the end of 2021. The company’s stock is risen about 19 percent so far this year. Dividend-paying companies trade at less than 18 times forward earnings, a tiny discount from their historical median, adding to their appeal in a market where valuations are high compared to historical levels, according to Katie Nixon, chief investment officer at wealth management firm Northern Trust. “Over the next several years, we expect dividends to climb at a rate above inflation, providing investors with the ability to generate their own cash flow in a yield-starved world,” she added. When the minutes from the Federal Reserve’s most recent meeting are revealed on Wednesday, investors will have a better understanding of the central bank’s views on inflation, while the ISM reading of service industry activity will be issued on Tuesday. In May, the index reached a new high as the economy’s recovery intensified. Dividend-paying equities appear to be in a good place, with stable payouts that are projected to rise if the economic recovery continues, according to NFJ Investment Group’s Burns McKinney. McKinney is looking at companies that had their dividends stopped or lowered during last year’s broad economic lockdowns and will likely increase them this year. “You’ve got a number of companies that will stay up with inflation, and you’ll get rewarded in the interim,” he said, referring to increased dividend payouts. He mentioned companies like Honeywell International Inc and Broadcom Inc (AVGO.O), as well as the S&P 500 energy sector. David Randall contributed reporting, and Cynthia Osterman edited the piece. The Thomson Reuters Trust Principles are our standards./nRead More

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