Dividend Stocks Fight Volatility

Many investors could find the process of weeding through a vast—and still growing—roster of dividend-focused equities ETFs mind-boggling these days, because there are so many funds out there offering their own take on the same theme, but one thing is certain: At times of increased market volatility—thanks to a global economy that has yet to find a strong footing, following the credit crisis of 2008—dividend stocks do more than generate income, WisdomTree’s Director of Research Jeremy Schwartz told IndexUniverse Correspondent Cinthia Murphy in a recent interview. They are actually quite good at mitigating volatility in a portfolio.

Schwartz: About six years ago, when we launched 20 dividend funds in one day, we wanted to come out of the gate with a real alternative to market-cap-weighted strategies. Our goal was to allow investors to be able to do asset allocation in dividend baskets because there were few alternatives to market-capitalization indexes in the ETF market. Today the market environment is even better for dividend stocks than it was six years ago: Interest rates are at historical lows; the yield on 10-year Treasurys is very low; the traditional sources of income have all but dried up. There’s also more of a concern today that the 30-year bull run in bonds will eventually reverse, and you also have an aging demographic that is looking for higher income and lower volatility. Dividend stocks typically deliver that.

Source: IndexUniverse

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