The Weekly Strategy Report (11 December 2017) - J.P. Morgan Asset Management

The Weekly Strategy Report (11 December 2017)

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.

Weekly Strategy Report (December 11, 2017)

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Please be aware that this material is for information purposes only. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are, unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all-inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. JPMorgan Asset Management Marketing Limited accepts no legal responsibility or liability for any matter or opinion expressed in this material.

The value of investments and the income from them can fall as well as rise and investors may not get back the full amount invested. Past performance is not a guide to the future.