Navigating Volatile Markets Via Dividend Investing - Part 1

Noah Kiedrowski - Contributor - Biotech


Dividend investing doesn't offer the most exciting means in which to invest these days when compared to stocks such as Netflix, Facebook or Amazon or sectors such as the biotechnology sector. Despite this lack of excitement, when considering the attributes this dividend space offers, such as decreased volatility, healthy yields, moderate risk exposure and a hedge against downside risk, it may be an ideal synergy for any long portfolio. This is especially true as the markets have been highly volatile due to weakness in China, an imminent fed rate hike and persistently low oil prices. Historically, companies that have an established track record of not only paying dividends but growing their dividends over the long-term have generally outperformed the their respective index with decreased volatility. I'll be utilizing The Vanguard High Dividend Yield ETF (ticker symbol: VYM) as a proxy for a high-quality cohort of large-cap centric dividend paying stocks. This type of dividend portfolio may prove to be a meaningful piece of an overall growth retirement strategy while providing a reasonable level of income and mitigating risk. The allocation within VYM offers a broad dividend paying portfolio and access to all sectors throughout the large-cap space without sacrificing diversification and in turn can generate sustained long-term growth and income while navigating volatile markets.

High-Level Overview

• The dividend space offers many long attributes: decreased volatility, healthy yields, moderate risk and a hedge against downside market swings.

• Dividend investing often gives rise to share buybacks, rendering an effective way to drive shareholder value via returning capital by repurchasing stock.

• VYM has outperformed the S&P 500 in past two down markets in 2008 and 2011 by 4.9% and 8.4%, respectively.

• VYM has more than doubled its dividend payouts over the past 5 years.

Mitigating risk and volatility with a high-quality cohort of dividend paying stocks

VYM is composed of high yielding dividend-paying large-cap companies and weighted by market capitalization. This domestically focused dividend paying ETF provides access to some of the biggest names across many different sectors that provide a healthy dividend yield, equity appreciation, diversification and decreased volatility. Continue reading "Navigating Volatile Markets Via Dividend Investing - Part 1"