Money manager Federated Investors’ Strategic Value Dividend managed account strategy falls into this category, and has some of the qualities an income-seeking investor is after.
The strategy’s objective is to provide a high level of current income, long-term capital appreciation driven by dividend growth, and lower downside risk.2
Why Does Federated Focus on Dividend Paying Stocks?
Research conducted by Federated Investors shows that over the period from July 1, 1996 to June 30, 2013, a high dividend paying stock strategy generated an average annualized total return of 10%, which is 278 basis points higher than the 7.22% annualized return realized by the S&P 500.
Federated also believes that dividend paying stocks may help provide downside protection when the broader market is posting losses, since a sizable portion of high dividend paying stocks’ return is in the form of cash.1
That said, Federated acknowledges that a high dividend equity portfolio may underperform during strong growth markets,1 but they believe over time a portfolio of high dividend paying stocks can produce attractive total returns as well as offer lower levels of long-term volatility compared to low-or-no dividend stocks—all while pursuing competitive performance in both up and down markets.2
The Federated Strategic Value Dividend Investment Approach
Stocks are selected from a universe of companies with market capitalizations over $3 billion and a dividend yield greater than 3%. They are evaluated based on dividend yield, dividend growth, strong financial conditions, and performance during periods of market weakness.
One notable feature of the Federated Strategic Value Dividend approach is that they always remain fully invested,2 believing that the downside impact can be lessened by owning high quality dividend stocks over time.
Some examples of current dividend paying stocks in the portfolio today are Vodafone, Conoco Phillips, AT&T, and Kraft Foods,3 all names that are fairly recognizable in the marketplace.
Though Federated remains fully invested, they will sell stocks in the portfolio if they don’t meet the portfolio’s standards. A stock is intensively reviewed for sale when one or more of the following occur:
- Dividend yield becomes inadequate
- Investment thesis deteriorates
- Weighting exceeds 5% of portfolio
- Diminished management commitment to paying dividends2
Federated Strategic Value Dividend: A Strategy with Experience
Money manager Federated Investors was established in 1955, and with $366.7 billion under management is one of the largest asset management firms in the industry. Management at Federated certainly has experience, and the Federated Strategic Value Dividend strategy has managed to outperform the Russell 1000 Value since inception.
To request information about past performance and comparative analysis on any or all of Federated’s strategies, please contact one of our Wealth Managers at 1-800-541-7774 or request the information here.
Federated believes that an investment product with a high current yield, a growing income stream that offsets inflation, and lower downside risk will help meet the needs of a wide range of investors including those entering a distribution phase over the next decade. The question is, are you one of those investors?
Call WrapManager Today to Learn More About Federated Strategic Value Dividend
To learn more about Federated Investors' Strategic Value Dividend strategy and other money managers, call one of our Wealth Managers who can provide you additional information and help determine if the strategy makes sense for you relative to your goals, time horizon, and risk tolerance. A conversation is a good way to get started, so call us today at 1-800-541-7774 to learn more. Alternatively, you can start by answering a few questions here.
Sources:
2 Federated Investors Managed Account Fact Sheet
3 PSN Informais
There are no guarantees that dividend paying stocks will continue to pay dividends. In addition, dividend paying stocks may not experience the same capital appreciation potential as non-dividend paying stocks.
Strategy descriptions listed represent a brief outline of the portfolio’s objective. There is no guarantee that any manager or product will be successful in achieving the objective described. The strategy used by the money manager listed is not suitable for all investors. This material does not represent a personalized recommendation and does not reflect individual investor’s risk and return goals nor does it serve as the receipt of, or a substitute for, personalized advice from WrapManager, Inc. or any other investment professional.
