In today’s investing climate, it appears to me that certain stock characteristics are taking precedents that could potentially result in a very negative scenario for investors continuing to pursue such characteristics over and above conservative long-term fundamental principles.
Characteristics such as growth, momentum, alpha-only, etc. are dangerous to focus on, in my opinion. These sorts of strategies focus on investing aggressively (playing offence), often ignoring risks and hedging appropriately (also playing defense).
The good thing about dividend stocks is these companies that pay a decent dividend are almost always defensive in nature, providing investors who have a significant portion of their portfolio invested in aggressive strategies with some downside protection if things go south.
A company like BCE Inc. (TSX:BCE)(NYSE:BCE) with a 5% dividend is a great option for investors seeking some security.
This Canadian telecommunications giant is in as stable an industry as one could hope for, with excellent dividend growth underpinned by an incredibly consistent stream of cash flows which also grows over time.
I think companies like BCE that are undervalued today by Mr. Market, who has forgotten about these great quality names, will shout much higher in poor economic times as investors flee for safety and look for dividend yield to help ride out the poor times (and also because we’re likely to enter a zero interest rate or negative interest rate environment at that point).
Buying companies like BCE, that might have less capital appreciation over time, but will provide a very reasonable dividend that will grow, seems like a great idea as we enter the late innings of this expansion.
Invest wisely, my friends.
