Dividend strategy that yields 19% returns

The dividend strategy of buying higher paying stocks and selling lower paying stocks has paid off this year.

specific, This strategy has generated returns of up to 19 percent through June Although it lost some steam during the summer with increased inflows to growth stocks.

Although it has done well again in the past two weeks due to investors fleeing towards safe haven assets (as in the case of income-driven stocks) due to fear of a global economic slowdown, according to Bloomberg.

Dividend strategy is gaining momentum again

So, if you look at the MSCI Asia Pacific High Dividend Yield Index, the worst performing period for dividend stocks seen this summer seems to be over.

Specifically, this index lost a modest 0.2 percent of its value in the past week, in line with the overall MSCI Asia Pacific Index, which fell 0.5 percent in the same time period.

Stocks in Asia continued to rise With a number of positive surprises,” says Sat Dohra, fund manager at Janus Henderson in Singapore.

Dividends, Defensive Strategy

He added that the defense sectors in particular such as telecommunications and other cyclical areas such as materials and energy have done well recently and confirmed their commitment to taking profits.

But, in addition to that, these sectors along with telecommunications and infrastructure should do well in his opinion given investors’ intent to invest in dividend strategies in an environment of stagflation, Dohra adds.

Dohra said analysts’ earnings per share estimates continue to improve in many parts of the region except for those that already have relatively high returns such as Australia and Taiwan.

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The word “era” refers to Asia but similar cases occur in Europe and the rest of the world.

Dividends increased by 11% in the second quarter

Specifically, global dividends rose 11 percent year-on-year to $544.8 billion in the second quarter, driven by the recovery in Europe and higher payments in the United Kingdom after the pandemic shutdown, according to data from Janus Henderson.

Although, you also have to keep in mind that earnings are not immune to stagnation.

Indeed, although European companies have paid out many dividends this year, expectations for cash payments in 2023 have waned on the old continent as the specter of recession looms on corporate margins.

Thus, even though Janus Henderson raised his dividend forecast for 2022 to $1.56 trillion, he expects growth to be slower next year.

Dividends will slow next year

“As we move into 2023, there will not be much momentum in the dividend update compared to the Covid-19 phase,” said Ben Lofthaus of Janus Henderson.

“In addition, slowing global growth and the potential for mining profits to approach peak will add additional headwinds,” he adds.

Against this background, the expected dividend yield on the Euro Stoxx 50 Index has fallen slightly from 4 percent in July to 3.8 percent today, according to data from Bloomberg Intelligence.

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