Barron’s recently ran an article (written by Research Affiliates), which is titled “Get Smart About Picking Dividend-Rich Stocks.” The article highlights that high-quality high-dividend-paying stocks outperform low-quality high-dividend-paying stocks. The quality of the firm is measured by profitability, financial distress, and accounting red flags.
Takeaways: The top quintile of dividend paying firms outperformed the universe over the past 50 years when comparing CAGR, Sharpe and Sortino ratios (comparing column 3 to column 4). Splitting high dividend-paying firms by value worked historically. Column 1 (top dividend payers, high value) outperformed column 2 (top dividend payers, low value) across all performance measures — CAGR, Sharpe and Sortino ratios. The results suggest that a sort on a simple value investing measure works well at sorting dividend stocks. Compared to the more complex quality screen proposed by Barron’s, this sorting variable is a good alternative for investors who prefer high dividend stocks.
Source: ValueWalk
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- 10 Small/Mid-Cap Dividend Growth Stocks Answering The Call
- Free Cash Flow Payout vs. Dividend Payout
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