Surveying the Landscape for Dividend-Growth Investors

Surveying the Landscape for Dividend-Growth Investors

May 7, 2020

As more companies are cutting their dividends in this uncertain market, what role do dividend-growth stocks play in your portfolio? Vice President and Dividend Income Strategy Portfolio Manager Charlie Toole discussed the dividend landscape for investors in our recent quarterly webinar*: Separating Pandemic Noise From Investment Signals.

Please enjoy the excerpt below and click here for the full webinar replay to hear more.   

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Charlie Toole: As the pandemic and deficits are on people’s minds and certainly in the headlines, I think that dividends and their sustainability or whether or not they’ll be cut or suspended is also in the headlines. And we are going to see several dividends be cut or suspended by companies in the coming months. We’re in a recession … The economy has just been turned off.

In fact, we’ve already seen several dividend cuts or suspensions from companies that have been hardest hit by the virus, specifically the travel and leisure industry and the energy sector. But I expect more cuts to come across from other sectors and industries. One of the things that we try to do when we’re avoiding (or trying to avoid) companies that are going to cut their dividends is research their financial strength.

We consider, or we try to analyze, their balance sheet and determine if they have a “battleship balance sheet.” If they’re able to withstand a slowing economy or, in this case, an economy that’s turned off.

We also analyze the business model of the company. Do we think they can continue to pay the dividend in an economic slowdown? And how has the company handled the dividend in past downturns? Did they continue to pay or grow their dividend or did they cut the dividend?

Not all companies are the same. There will be winners and losers, and we look for the winners, the companies that will consistently grow their dividends while others are cutting and suspending in a downturn. In fact, we’ve had three stock holdings raise their dividends over the last two weeks. So we’re glad that we’re able to find these strong companies that can continue to grow and pay their dividends through this tough time.

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Click here for a replay of Separating Pandemic Noise From Investment Signals. Read our special report, Dividend-Growth Stocks, to learn more about our approach to selecting dividend-paying stocks for a portfolio. You can also hear more from Charlie and his team in our recent podcast episode, Earnings Reports From a Pandemic: Innovation, Adaptation and Taking Shelter.

Please contact us at (800) 492-6868 to learn more about our comprehensive wealth management solutions.


*Webinar recorded after the market closed on Wednesday, April 22, 2020.

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