An analysis of dividend-oriented equity strategies
27 June 2017 | Portfolio construction
Equity income strategies are a perennial favourite with investors. This paper takes a look at two popular dividend strategies – high dividend yielding and dividend growth – and explores their impact on portfolios when used in place of high-quality fixed income or broader equities. Key findings include:
- Equity income strategies are best considered in the context of total return, i.e. income and capital appreciation;
- Substituting dividend-oriented equities for fixed income can significantly raise the risk profile of portfolios;
- Equity income funds also tend to be more interest rate sensitive than broad equities;
- Performance relative to broad equities is time-period-dependent and driven by a handful of underlying factors.
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