By Nancy Tengler, CEO & Chief Investment Officer
I have been managing dividend growth strategies since the mid-1980s. Income investing is not a fad at Laffer Tengler. Our 5-star Morningstar rated Equity Income Strategy employs the same valuation methodology, relative dividend yield (RDY), I employed for my 35+ years in the business.
RDY is unique because the relative nature of the RDY metric allows us to invest in fallen-angel growth companies who are committed to growing the dividend as a portion of long-term sustainable earnings growth. The beauty is we get paid to wait for the fundamentals to improve in these companies with the potential to grow faster than the average value stock. In order to avoid owning what we call terminally cheap stocks or value traps, we utilize our proprietary 12 Fundamental Factors research model—a firm-wide discipline.
I recently made a presentation entitled “Inflation, Recession and the Midterms” (please reach out to email@example.com if you would like to see the presentation deck) where I discussed among other things, the relative attractiveness of dividend strategies. The chart below from Wellington Management and Hartford Funds reveals the second quintile (where we shop for Equity Income) as the sweet spot.
This is the right time to own dividend growers. They not only provide us with information around the stock’s relative attractiveness (RDY) but they provide a growing income stream (a hedge against inflation) and protection in a declining market.
Bear markets are no fun. But we do know that every bear market is eventually followed by a bull market and the trick is not to let the market volatility scare you out of stocks. I am resurrecting the chart below from our friends at Strategas to demonstrate the importance of staying invested. Even when it hurts.
If you have any questions regarding our proprietary strategies, please reach out to Fern Hailey, Senior Managing Director (firstname.lastname@example.org).
Existing Homes Sold and Affordability: Wow!
U.S. existing home sales (white) declined 22.3% last quarter after peaking in June 2021. Affordability for first-time homebuyers plunged 30.1% as the 30-year mortgage (fixed-rate) hit 6.7%, more than double year-ago levels.
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