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Is It Time For Dividend Stocks ?
Many experts are bullish about sectors that have been out of favor . By Ben Mattlin
BY MID-NOVEMBER 2023 , THE S & P 500 HAD ADVANCED nearly 15 % for the year . That performance was largely driven by a handful of growth stocks in the tech and travel and leisure sectors .
But for investors who favor stocks that pay dividends , it ’ s been a tough year , thanks partly to rising interest rates . Experts say that ’ s about to change .
“ 2023 has provided a challenging backdrop for dividendpaying companies ,” says Tom Huber , portfolio manager of T . Rowe Price ’ s Dividend Growth Fund and Dividend Growth ETF . “ As of the end of Q3 , non-payers outperformed dividend payers by 26 %. … However , this is providing us significant opportunity in dividend-growth companies , which we believe can continue to compound value over the long term — and many of which are trading at only market-like multiples or less .”
In other words , these stocks are undervalued . “ There are attractive , relatively high dividend-paying stocks in most sectors ,” says Eric Beyrich , chief investment officer at Sound Income Strategies in New York City .
He cites telecom giants like AT & T and Verizon , as well as Omnicom Group and Interpublic Group , two New Yorkbased communications-services providers . He also mentions consumer staples such as Molson Coors Beverage Co . and Chicago-based packaged-food producer Conagra Brands .
“ The way to find [ such opportunities ] is to look at the areas that have underperformed the most , on a price basis , as that tends to lift the yields ,” he explains . “ Then look for companies with scope for improvement .”
Beyrich is not alone in his view on the market overall , though different investors have varying views of the particulars .
Defensive Sectors “ As a result of the stock market ’ s flight to riskier assets this year , which came about on expectations of a soft economic landing , many defensive sectors are now offering attractive relative valuations ,” says Burns McKinney , portfolio manager of the Virtus NFJ Dividend Value Fund . “ These sectors also offer attractive yields .”
At the same time , he says , the industrials sector offers “ solid dividends and secular tailwinds .” Infrastructure spending by government programs is ramping up , he adds , and geopolitical uncertainty favors rising defense outlays — two trends that
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