Friday, April 04, 2014

Dividend Payers Bounce Back In March

For the month of March the dividend payers in the S&P 500 Index regained their footing and outperformed the non payers by a full 3.75 percentage points. In spite of this outperformance by the payers in March, the payers return continues to significantly trail the non payers return on a year to date and 12-month basis.

From The Blog of HORAN Capital Advisors

For investors though, is the outperformance by the dividend payers in March another sign the market is shifting to focus more on value oriented equities versus growth equities? We discussed this potential transition in a post a week and a half ago when we discussed the significance of the recent outperformance of value stocks versus growth stocks.

The market's action today was certainly most negative for the momentum oriented stocks and biotech and social media sectors. On a year to date basis the utility sector has significantly outperformed the overall market as can be seen in the below chart. Utility stocks tend to be safe haven investments for investors due to their generally higher dividend yields.

From The Blog of HORAN Capital Advisors

We would caution investors to pay attention to stock valuations (P/Es) relative to a company's earnings growth rate (PE divided by EPS growth rate) as some of these historically value oriented stocks/sectors are trading at rich valuations and high PEG ratios.

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