As markets normalize and investors begin to wade back into the water, traditional forms of investing will come back into the mainstream. Among the strategies to re-emerge will be growth and income oriented investment strategies. Unfortunately, income investors are now confronted with difficult choices. The U.S. treasury market appears increasingly risky as the government runs up massive debts, prints money and subsequent inflationary pressures increase. In addition, corporate bonds have experienced an unprecedented 6 month rally and are no longer as attractive as they were earlier this year when we were confronted with a once in a lifetime buying opportunity. In the equity markets we are confronted with a similar situation. Markets are coming off a massive rally and at current valuations are likely to return average or sub-par returns several years into the future.
As investors search for income I believe dividend paying stocks will play a more and more important role in investor’s portfolios. In addition, portfolio managers are likely to begin diversifying out of higher risk corporate bonds and high beta assets in favor of lower volatility higher yielding assets. One of the obvious beneficiaries of such a theme is high quality dividend paying stocks. I’ve compiled a list of 8 examples below for readers to ponder and research. The goal was to create a list of very high quality high yielding, global names. The criteria were fairly straight forward: high ROE, low debt levels, high current ratio, strong free cash flows, and of course, a respectable dividend yield. The results are below. Thoughts, opinions and additions to the list are encouraged.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.