Dividends: The Original Smart Beta

The growth of smart beta investing has translated into tremendous growth for both the index and ETF segments of the financial community. While I am not here to debate or dissect the basis of smart beta strategies, the collective investment norm of smart beta has been established — factors and various other fundamental metrics are used to tilt, alter and skew a benchmark to generate a slightly different risk/return profile. Nasdaq, alongside other index providers, has jumped on the smart beta wave in exploring the various technical and fundamental metrics used to create these enhanced strategies. In light of this, it is worth revisiting one of the simpler facets of smart beta: Dividends.

A favorable change in the US tax code in 2003 contributed to broadening the appeal of dividend-paying stocks. Today’s environment of zero policy rates and ultra-low bond yields also highlights the attractiveness of these securities. The attention they are receiving is well-deserved: even as investors and fundhouses seek out new and complex sources of systematic return, dividend investing, time-tested over many decades, has never made more sense.

Source: NASDAQ

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