Valuations for some dividend-paying stocks might be a bit overextended, but they’re not overpriced, according to a panel of experts.
In fact, these can be considered boom times for dividend investing. says a veteran portfolio manager.
“We’re in the golden age of dividend investing,” says Hersh Cohen, managing director, senior portfolio manager and co-chief investment officer for ClearBridge Investments. “We’re seeing a staggering increase in dividends.”
Several companies have sharply increased their dividends, including Target, Wal-Mart and Caterpillar.
Technology companies such as Texas Instruments, Qualcomm and Cisco pay dividends, which would have been unheard of a few years ago because it would have jeopardized their standing as “growth” companies, Cohen says.
Cohen spoke on a panel yesterday at the Morningstar Investment Conference in Chicago that focused on whether a dividend bubble has burst.
Cohen and his copanelists, Jesper Madsen, portfolio manager for Matthews International Capital Management LLC’s Asia Dividend and China Dividend strategies, and John Spears, vice president of Tweedy, Browne Fund, agreed that dividends were in no danger of collapsing.
Cohen says there’s a difference between stock values being overextended and being in a bubble.
“A bubble is when [prices go so high that] you never get your money back. That’s why I don’t think we’re in a dividend bubble,” he says, adding that dividend stocks are not at valuations similar to what technology companies were during the dot-com bubble in the late 1990s.
Madsen says some of the Asian staples stocks have run up a bit more than he’d like and he’s sought to tweak his fund to emphasize growth more than yield. “We’re not solely seeking yield… . We’ve been trading down on yield to get more growth,” he says.