Dividend Signaling

March 20, 2013

There is a lot that people get wrong when it comes to income investing.  This is one reason we put together the Shareholder Yield book coming out in a few weeks, finally!  (For those that cannot wait a good review of the topic can be found written by Wes Gray in Enhancing the Investment Performance of Yield Based Strategies.)

The highest dividend yielding stocks are often the highest yielders simply because they pay out more of their earnings as dividends, and often those dividends are not sustainable.  This is one reason the top fractile of dividend stocks does not outperform the next fractile, a point often overlooked (here is a piece from Global X that touches on the subject).  One way to get around this problem is to screen for companies that have a high yield, but low payouts.

In this week’s issue we take a look at a couple white papers from Forward, who manages over $5 billion in assets.

Below are a few charts before the download:

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Download the content here:

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About

The world has changed, leading investors to seek new strategies that better fit an evolving global climate. Forward’s investment solutions are built around the outcomes we believe investors need to be pursuingnon-correlated return, investment income, global exposure and diversification. With a propensity for unbounded thinking, we focus especially on developing innovative alternative strategies that may help investors build all-weather portfolios. An independent, privately held firm founded in 1998, Forward (Forward Management, LLC) is the advisor to the Forward Funds. As of June 30, 2012, we manage $5.4 billion in a diverse product set offered to individual investors, financial advisors and institutions.