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March 29, 2012 at 08:43 AM
“Finding Yield Through Equities,” an Envestnet Market Morning webinar held Thursday, offered a look at some strategies from Carol Lippman, managing director of Dearborn Partners, and Mariana Bernunzo Connolly, head of client portfolio management, J.P. Morgan Asset Management. Both espoused the use of dividend-paying stocks as a means of adding yield to a client portfolio.
Lippman pointed out that investors are avoiding the market in the wake of the financial crisis, although stocks are, and have been for some time, on the rise. Companies with growing dividends, she demonstrated, have provided a better average annual return over the last five years in each sector of the S&P 500 than those that relied on growth alone.
Lipmann introduced Dearborn’s rising dividend strategy, in which the company looks for stocks that have a stable dividend, an attractive current yield, and the likelihood of consistent dividend increases. Companies that offer good dividend yield but with little prospect of yield growth are not considered candidates for their portfolio.
Other factors considered before a company is included in the portfolio are sound fundamentals; a defensive business; a habit of putting the bulk of its earnings back into the business for growth; no need to borrow; and a dividend growth rate that exceeds the rate of inflation. If a stock is no longer able to meet these criteria, it can be removed from the portfolio.
As examples of companies that provide dividend growth over the long term, she cited Chubb Corp. (CB), Coca-Cola (KO) and Kimberly-Clark (KMB).
