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Evercore: 3 Value-Oriented Dividend Stocks Will Pay Investors Who Wait

Evercore: 3 Value-Oriented Dividend Stocks Will Pay Investors Who Wait
(Iqoncept/Dreamstime)

By    |   Friday, 14 February 2020 09:24 AM

Evercore ISI Research predicts that a trio of value-oriented dividend stocks will pay off for patient investors.

Dennis DeBusschere, a quantitative strategist at the firm, notes that sustainable dividend-stock portfolios — commonly defined as stocks with high yields, low payout ratios, and high dividend growth — were dragged lower in January in part by “value headwinds,” Barron’s reported.

Among the stocks that Evercore ISI classifies as sustainable dividend growth names are Phillips 66 (PSX), JPMorgan Chase (JPM), and Pfizer (PFE). In January, those stocks fell about 16%, 4%, and 3%, respectively, Barron’s said, citing FactSet data.

DeBusschere, however, noted that “fundamentals remain supportive of dividend-focused strategies,” and points to the 10-year U.S. Treasury note’s tiny yield as a factor.

DeBusschere also sees solid macro fundamentals: “With growth stable, global central banks committed to maintaining accommodative financial conditions, and consumption growth strong, we anticipate a medium-term rebound in yields,” he wrote.

However, Investor’s Business Daily recently warned that a rising dividend yield may simply be masking a money-losing stock.

“Let's say you buy a $30-a-share stock that pays $3 a year in dividends. You might be initially thrilled with your impressive 10% annual dividend yield ($3 dividend divided by $30 stock price). Now, the stock crashes to $15 a share and the company holds the dividend the same. Applying the same dividend yield formula, the stock's dividend yield doubles to 20%. Looks great. But wait a second, despite the higher yield, you're worse off because you lost $15 a share on the stock,” the report said.

“It will take five years of $3 dividend payments just to break even on your stock loss,” IBD explained.

“This is why chasing yield is often a bad idea when looking for high-dividend stocks. High yields are often a mathematical distortion of a declining stock

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Evercore ISI Research predicts that a trio of value-oriented dividend stocks will pay off for patient investors.
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2020-24-14
Friday, 14 February 2020 09:24 AM
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