The Weekly Strategy Report - J.P. Morgan Asset Management
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The Weekly Strategy Report

Contributor Multi-Asset Solutions
In brief
  • A long-standing relationship between bond yields and dividend performance broke down after the global financial crisis: Despite low interest rates, the traditionally high yielding dividend stocks offering income—consumer staples, pharmaceuticals, telecoms, utilities, energy—have lagged the market.
  • Challenger companies have unseated longtime market leaders in sectors such as biotechnology, automotives and tech. Many don’t pay dividends and are benefitting from an insignificant cost of capital.
  • With payouts to U.S. shareholders (dividends and buybacks) now equal to earnings, and with our expectation they will continue to offer a principal source of equity returns in the coming years, we see equity income becoming an essential part of income-focused investors’ portfolios.
  • We see potential opportunities for sustainable yields with decent dividend growth in the financial, mining and automotive sectors.
EXHIBIT 1: High dividend yield stocks'and bond yields relative performance

Source: ThomsonReuters Datastream; data as of December 7, 2017. For illustrative purposes only.

The Weekly Strategy Report (December 11, 2017)

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