Ma rc h9,20 20 BARRON’S 17
TheETFOption
Threeex change-tradedfundsthat can offerinv estorssoliddividendgro wth
Re cent YTD Dividend Assets Expe nse
Dividend ETF / Ticke r Price Change Yie ld (bil) Rat io
Vanguard High DividentYield/ VYM $84. 94 -9. 4% 3. 7% $27 .9 0. 6% 0
SPDRS&P Dividend/ SDY 97. 69 -9.2 3.2 17. 9 0.3 5
Schwab U.S.DividendEquity/ SCHD 53. 11 -8. 3 3. 5 11 .1 0. 06
Da taasof3/5/ 20 Source:Bloomberg
right anddemandfor fossilfuelscontinues
to riseov re thenext20 years,thecompany
couldbe in a greatpositionin a fewyears,
havinghigherproductionandgainingmar-
ketsharefromit rivals.s
Chevron,whosesharesareoff 21%this
year, to $9 5, coversit dividends morecom-
fortably. It nowstandsat 5.4%.
Ne xt to energy, financialst ock shav e
beentheworst performersin thestock
marke thist year, as inv estorsanticipate
weaker bankearnings.Thesharpdropin
ratesis themainculprit,pressuringnet
interest margins.
Bankearningscouldbe lowe nri 2 020
thanin 2019, butthati reflecteds in the
stocks whic, h aredo wnan av erage of 25%
so far thisyear. Wi th thedecline, some
bankslikeWellsFargo, whosesharesare
off 30%thisyear, to $37 , andComerica
(CMA), at $45,yieldov re 5%.Othermajor
banks,includingJPMorganChase(JPM),
Bankof America(BAC), andCitigroup
(C),yieldabout3%.
“Webelieve bankdividendsaresafe,”
JasonGoldberg, theBarclays bankingana-
ly st, emailedB ra ron’ son Friday. “While
bankearningswillbe ad versely impacted
by thesudden dropin interest rates,it is
important to notethattheindustry enters
thisperiodof uncertaintyfroma position
of strength,withrecordcapital andliquid-
ity andbenignasset-qualitytrends.”
Banks,he notes,aresu bjectto a far
moread verseeconomicandfinancialsce-
narioin theannualstresstestsadminis-
teredby theFederalReserve thanwhat’s
likely fromthecoronavirus. Theextreme
stressscenarioenvisionsan 8%dropin
grossdomestic productfrompeaklev els
anda 10%unemploymentrate, against
3.5%in February.
TheWellsFargo yieldisve y safe,”r Jami-
sonsay s. “ThenewCEO[Charles Scharf]
willcleanhouse.It’ s a greatfranchise, andit
willbecomemoreconsumerfriendly.” A
majormortgage lender, WellsFargo should
alsobenefitfromthedropin rates.
AbbVie, which is dueto completeits
merge w hr it Allergan(A GN)in thecom-
ingmonths,trades around$89andyields
5.3%,amongthehighest dividendsin the
drug group.It hasa comfortablepayout
ratioof about50%,basedon it s projected
2020 earningso aboutf $9 .6 7 a share.
Dow, thechemicalsproducer, ash been
hit hardalongwithothereconomically
sensitive st ocks, falling29%thisyear,to
$40.It yields7%andhasa highpayout
ratioof 81 %basedon projected 2020
earningsof $3. 49 a share. Do w is commit-
tedto whatit callsan “industry-leading
dividend.”Ho wardUngerleider, its presi-
dentandchieffinancialofficer,calledit
thecompany’s “No. 1 priority”for free
cashflo w on an earningsconferencecall
in January.
AT &T,whosesh aresat $37yield5. 6%,
hasa managea ble pay outratiobelow60%.
Thecompany is sufficiently comfortable
withit s outlookto increaseit shares repur-
chaseprogramunderpressurefromactiv-
ist hedgefundElliottMa nagement.
Altria,knownfor its Marlborociga-
rettes,hastakena write-downo aboutf
60%on its Ju ul Labsstake, butthat
shouldn’t affectits ability to paythedivi-
dend.At $43,Altrianowyields8%.The
company takesits dividendver y seriously.
It hasliftedit 54 timesin thepasthalf-cen-
tury, includinga 5%increaselastyear.
ThetopU.S.cigarettemakertargets an
80%dividendpay outratio. Gi venthehigh
yield,someinv e orsst wouldliketo see
Altriaforgo a dividendincreasethisyearor
raisethequ arterly pay out—now 84 cents—
by justa pennyto buybac k morestock.
Likeotherlife insurers,PrudentialFi-
nancialhasbeenhit by thedecline in inter-
est rat es, whichmaypressureearningsas
maturingbondholdingsneedto be rein-
vestedat low er yields.Thecompanyhasone
of thehighest yieldsof its peersanda
comfortablepay outratioof under40%.It s
shares,at ab out$7 0, yieldov er 6 %.
In vestorscanalsoplayhigh-yielding
stocks throughmanyETFs,includingthe
VanguardHi gh DividendYield(VYM),
SPDRS&PDividend(SDY),andSch wa b
US DividendEquity(SCHD),all yielding
morethan3%.
Manyinv est orsnowpreferlower-yield-
ingst ock s withsaferdividends,butthereis
stilla placefor highyieldersif inv est orsare
selective in theirchoices. B
- Jim Cullen,Chairman& EOC
Fo further information,r pleasecontactSchaferCullenCapitalManagement
212.644.1800• [email protected]• schafer-cullen.com
SchaferCullenCapitalManagementis an independentinve stmentadvisorregisteredundertheInvestment
AdvisersAc of 1940.t Thisinformationshouldnot be usedas the primarybasisfo r anyinve stmentdecision
nor,shouldit be construedas adviceto meeta articularp inve stmentneed.It shouldnot be assumedthatany
securitytransaction,holdingor sectordiscussedhas beenor will be profitable,or thatfuturerec ommendations
or decisionswe makewill be profitableor equalthe inve stmentperformance iscussedd herein.A list of all
recommendationsmadeby the Adviserin this strategyis av ailableuponre questfor the 12 monthspriorto the
dateof this re port.
HighDividendValueEquity
EnhancedEq uityIncome
ValueEquity
InternationalHi ghDividend
EmergingMarketsHighDividend
“A t the end of the day, the messageis
clear.B disciplinede about price,don’ t
ov erreactto headlinenewsand be a
long-term investor.”