The year 2022 has been marked by huge volatility and
uncertainty, which have raised the appeal of dividend investing. Though this
does not offer dramatic price appreciation, the strategy is a major source of
consistent income for investors in any market.
This is especially true as dividend-focused products offer
safety in the form of payouts and stability through mature companies that are
less volatile to the large swings in stock prices. The dividend-paying
securities are major sources of consistent income for investors when returns
from equity markets are at risk. Further, these products are proven
outperformers over the long term.
While there are plenty of options in the dividend ETF world,
zeroing in on the dividend aristocrats could be a wise move in the current
market environment, which has been ruffled by higher inflation, aggressive Fed
rate hikes, and geopolitical issues.
Dividend aristocrats are blue-chip dividend-paying companies
with a long history of increasing dividend payments year over year. These
generally act as a hedge against economic uncertainty and provide downside
protection by offering outsized payouts or sizable yields on a regular basis.
Additionally, aristocrats tend to skew their portfolios to less-volatile
sectors and mature companies.
Additionally, these stocks have superior fundamentals that
make dividend growth a quality and promising investment for the long term.
These include a sustainable business model, a long track of profitability,
rising cash flows, good liquidity, a strong balance sheet, and some value
characteristics. Further, a history of strong dividend growth indicates a
likely hike in the future.
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