Portfolios, like trees, need nurturing. Dividends are the drips of moisture your investment portfolio needs to sustain and grow. This is especially important in times of severe drought and market volatility. We are constantly seeking out and evaluating dividend paying stocks for the portfolios we manage. At present, there are many good options and we welcome them.
Not all dividends are created equal and none are guaranteed, although it is rare for companies to reduce or eliminate payouts, as they are often deemed “untouchable”. Even in the severe downturns of past, dividends on the S&P 500 only fell by about 3% (source: Barron’s). Companies typically fall into two categories: those that maintain a fairly steady payout and those striving to raise theirs. Fund managers vary on preference and individual investors unique goals may cause a preference. Quite frankly, I believe we should embrace them all. Call me a tree hugger.
As we’ve stated numerous time this year, the ability to reinvest these dividends or use their income for life’s needs is vital to recovery in market downturns. In selecting dividend or yield generating investments, it’s important to remember that what they pay is a direct function of price. For example, a share of stock trading at $75 per share with a $2 dividend or 2.67%, is all of a sudden paying 3% if share price declines to $67. You can see how, in times like these, yields aren’t looking too bad. Companies that reward their shareholders in this manner are most always considered “nutritious”.
If you have any questions about the dividend payors you may or may not own or if you are reinvesting them, reach out.
Client To Do List:
Here are a couple of things all investors should do this summer:
- Check on your IRA accounts and know how you will be taking your Required Minimum Distributions this year. Please remember it is based on 12/31/2021 value of all your non-Roth IRA holdings.
- Investment holdings in your IRA may be at a lower value now than this time last year making this a good time to evaluate the pros and cons of converting traditional IRA assets to a Roth IRA. Please call for assistance with this.
Interesting Stats on Yearly Changes in Value*:
| Consumer Discretionary stocks | -33.1% |
| Technology stocks | -27.2% |
| Financial stocks | -19.5% |
| Copper | -16.6% |
| Treasuries, 7-10 year | -11.0% |
| Utility stocks | – 2.0% |
| Gold | – 1.3% |
| Orange juice | +22.8% |
| Corn | +25.4% |
| Energy stocks | +29.2% |
| Natural gas | +45.4% |
*Source: Wall Street Journal – first half of 2022