Federated has released their second quarter, managed account commentary for their Strategic Value Dividend portfolio.
"Market Overview
The major equity indexes slipped in June, as generally better-than-expected data on the U.S. economy gave way to worries late in the month over a possible Greek default, exit from the euro or both.The bulk of the monthly decline, which saw the S&P 500, Dow and NASDAQ fall a respective 2.1%, 2.2% and 1.6%, came on June 29, when a strong risk-off trade sent global equity markets tumbling as the Greek issue came to a head. June’s losses were enough to push the S&P to a virtually flat total return for the quarter.
Questions over Greece’s fate, as well as concerns over a potential default by Puerto Rico on its bonds, masked a month that all but confirmed a spring rebound from winter’s detrimental mix of bad weather,West Coast port shutdowns and a stronger dollar. Nonfarm payrolls in May posted their largest gain in five months, with a much stronger-than-expected increase of 280,000 jobs. Elsewhere, May existing sales topped expectations, new home sales rose at their fastest pace in nearly eight years and pending home sales—a gauge of future final sales—hit a nine-year high, all fueled by a growing share of first-time buyers. In addition, consumer spending accelerated, with May personal consumption expenditures up the most in nearly six years, led by autos and other big-ticket durable goods. Manufacturing activity was more mixed, with various regional and national gauges indicative only of modest improvement.
Still, the overall portrait of June’s economy was one that had put winter behind it. Most Wall Street forecasters are predicting a stronger summer and second half after yet another poor start to the year. But it remains to be seen if this will be enough to overcome market concerns about geopolitical eruptions such as Greece and Puerto Rico that have driven up volatility.
Performance and Strategy
In spite of the recent commotion in the markets precipitated by uncertainty in Greece and the Federal Reserve’s future interest rate plans, the Federated Strategic Value Dividend portfolio remained focused, as always, on seeking to provide investors with a high dividend yield complemented by dividend growth. At the end of June, the portfolio’s gross dividend yield measured 4.5%, higher than that of the broad market S&P 500 Index (2.1%) and the Dow Jones Select Dividend Index (3.8%), which aims to reflect the domestic dividend-paying universe. During the second quarter, the portfolio also realized six dividend increases.The most notable of these came from Williams Companies, Johnson & Johnson and Kinder Morgan, which raised their dividends by 10.3%, 7.1% and 6.7%, respectively. This is the third increase over the past 12 months for both Williams Companies and Kinder Morgan, which brings their cumulative trailing 12-month dividend raises to 14.3% and 11.6%, respectively. Johnson & Johnson’s April 2015 dividend hike marked 53 consecutive years that the company has raised its dividend. For the overall 35-stock portfolio, there have now been 17 dividend increases year-to-date at the halfway point of 2015." Download the full report below.
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