Going overweight on low-beta, high-dividend stocks helps make your portfolio defensive
Within equities as an asset class, there can be a broad
classification of growth and income investors. Growth investors seek to find
opportunities in high growth business ideas. In general, a portfolio of growth
stocks would have a high-beta. Further, there are dividend investors who look
for stable businesses with robust cash flows. Income investors prefer to hold
dividend paying stocks. Typically, a portfolio of dividend paying stocks have a
low-beta.
However, the best strategy is to remain diversified.
Overexposure to high-beta stocks can negatively impact the portfolio in a sharp
downside. Going overweight on low-beta and high-dividend stocks does make the
portfolio defensive. However, in times of high inflation, there can be a
potential risk of returns that fail to beat inflation.
My focus in this column is on high-quality dividend stocks
that investors can buy and hold forever. Besides potential for sustained
dividends and possible dividend growth, I have focused on stocks that also seem
undervalued.
Investors can therefore expect regular cash flows and there
is a possibility of decent capital gains. Let’s take a deeper look into seven
dividend paying stocks that are worth buying at current levels.
Comments
Post a Comment