Leavy said a reasonable dividend means you don’t necessarily have to reach for the highest yields possible. “You want an above-average dividend yield, but you really want to focus on dividend growth,” Leavy said. “Most people are going to have a very long retirement. [With] a fixed coupon … that purchasing power isn’t going to grow.”
He also advises investors to avoid companies with over-leveraged balance sheets. Leavy’s top picks include global consumer companies like Coca-Cola. Investors “can ride the growth of the middle class in some of the emerging economies,” he said.
And despite recent cuts, the firm believes dividend payout ratios in the financial sector will go on the rise, as is the casewith JPMorgan Chase.
“The best protection against dividend cutters is to really focus on the long-term growth of the dividends,” Leavy said. “That way you have some margin of safety.”
He noted that the ideal portfolio would include a combination of high-yield, lower-quality bonds and high-quality stocks, whose long-term growth rates are still “compelling.”
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Information on Chris Leavy’s holdings was not immediately available.