Stick With “Bond-Like Stocks”

According to a new research note from the British bank, stocks that pay steady and rising dividends are the place to be as worries about the health of the global economy begin to take hold. Barclay’s notes that “stocks in the sweet spot of monetary policy- high quality, high dividend yield, low volatility- are supporting the broader market.” A group of four sectors- including healthcare, utilities, energy and financials- are each outperforming the S&P 500 by a wide margin month over month. The bulk of that outperformance has come from the group’s dividend payments.

There’s certainly a method to Barclay’s madness. Dividends can help smooth out returns as these payments can help cushion the downside in falling markets. Reinvesting those payments can help enhance returns when the market rights itself. According to data compiled by Ned Davis Research, over the last 36 years, dividend stocks have outperformed the rest of the S&P 500 by 2.5% annually. More importantly, they outperformed non-payers by nearly 8% each year.

Source: Investopedia

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