Companies with the Lowest Dividend Yields Are Driving Performance
by Jennifer Thomson of GaveKal Capital,
In the month of January, the most important factor correlation to performance of developed market stocks has been dividend yield (DY).
Interestingly, though, the best performance has been generated in those stocks that belong to the lowest decile (those that pay a smaller dividend relative to their share price) while those with the highest DY have underperformed.
The trend remains the same over the last year– during which time the dividend yield had a near 80% correlation with performance (i.e. it was in the top 20% of influential factors). Which brings us to the question: are companies being rewarded for offering lower and/or cutting back on their dividends?