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The Case for Dividend Growth Stocks

Will dividend growers outperform as rates begin to rise?

Although high yielding equities have performed strongly in recent years, many have loaded up on debt and may come under pressure when rates rise. Some investors argue that quality stocks, with a history of dividend growth, may perform better in an environment of rising rates.

The Savvy Research team has curated some of the best recent papers, focusing on different aspects of dividends. Register today for free access to our research library of over 15,000 papers.

Growth Stocks evolutionary man

A Case for Dividend Growth Strategies (S&P Dow Jones Indices, Dec 2016)
Companies with high dividend yields have performed well in recent years, and have become quite expensive by most valuation measures. In this paper, S&P argues that stocks with a history of dividend growth are likely to outperform in an environment of higher volatility and rising rates.

What Difference Do Dividends Make? (FAJ, 2016)
This paper by CFA Institute evaluates the investment benefits of dividend-paying stocks and identifies three major findings.

Looking under the hood of the Russell 2000 Dividend Growth Index (FTSE Russell)
Evaluating stocks by price alone is not enough - quality characteristics matter too. This paper by FTSE Russell examines further.

Quality: A Practitioner's Guide (S&P Dow Jones Indices, Jan 2017)
Quality may seem like a relatively new concept for market participants that are already familiar with factors such as market risk, momentum, value, size, and growth. However, the idea of applying quality to investment decisions can be found in the philosophy of Benjamin Graham — nowadays considered the father of value investing.

The Effects of Dividend Yield and Policy on Stock Returns (Black-Scholes, 1973)
This classic 1973 paper from Fischer Black and Myron Scholes discusses the effects of dividend yield and dividend policy on common stock prices and returns.

High Dividend Yield Portfolios: Popular, But What About Risk? (Axioma, 2016)
As stock prices have risen, valuations have increased, and high DY strategies may be more risky because they have become overvalued. 

U.S. Dividend Trends: Buyback or Pay-Out? (BNY Mellon, Dec 2016)
In this article, John Bailer of The Boston Company examines dividend trends and considers what can be expected from income investors in 2017.

Dividend Growth: A Simple Strategy for Equity Markets (Goldman Sachs, 2015)
The authors discuss the importance of buying stocks that generate dividends, and in particular examine the question of why dividend growth is important.

A Field Guide to Emerging Market Dividends (S&P Dow Jones Indices, Jan 2017)
Little research has been conducted on the role of dividends in emerging markets. This paper examines the role of dividends in generating total return in EMs.