As market participants anticipate possible stagnant growth in the coming quarters, investors might be more apt to get back to "old fashioned" investing with higher-yielding stocks.
Amid the current market environment, should investors feel safe reaching for the carrot? "Dividends are an important source of income for many investors, accounting for about half of an investor's total return historically," said Tim O'Brien, Manager of the Evergreen Global Dividend Opportunity Fund. According to Mr. O’Brien, investors looking for dividend-yielding stocks should limit their exposure to financial companies, and look for higher-yielding preferred shares in addition to common stocks. Mr. O’Brien suggests considering companies in the utilities sector, since some of these companies provide relatively stable business models reflecting their longevity. "A company that is in a position to raise its dividend, it's obviously a company that's doing well."
According to Don Taylor, Manager of the Franklin Rising Dividends Fund, investors should also consider companies that continuously increase their dividends. Some of the sectors that Mr. Taylor favors include consumer staples, consumer discretionary, and diversified industrials. He suggests looking at companies with fairly stable business models and recurring revenue. "The sell-off that we have seen in many of these companies in the past year, makes it an attractive opportunity" Mr. Taylor added.