18 BARRON’S December 7, 2020
Dennis DeBusschere, chief portfolio
and quantitative strategist at Evercore
ISI, says the move into value stocks has
legs for the time being, “as long as vac-
cine sentiment remains positive.”
Pointing to “extremely low invento-
ries, a strong housing backdrop, $1 tril-
lion in accumulated savings from the
consumer, and a Fed that is going to keep
real rates negative,” DeBusschere thinks
that there could be “a mini economic
boom in the back half of 2021.”
“That combination [of catalysts] is
powerful, and I don’t think people have
internalized that yet,” he adds.
Golub, however, isn’t so sure about the
durability of the value rally. He pointed out
in a Dec. 1 note out that the rally has been
driven by four particular trading sessions
since Nov. 9—three Mondays with positive
vaccine news and the Tuesday when word
circulated that President-elect Joe Biden
would nominate former Fed chief Janet
Yellen as Treasury secretary.
On the four trading sessions with those
positive news developments last month,
S&P 500 dividend stocks in the highest-
yielding quintile rose 26%. Excluding
those four days of outsize gains, those
stocks returned minus 2.8% inNovember.
If the market “is only responding to mas-
sive outlying positive news, then it makes
you question how long this will go on for,”
Golub says.
Senyek points out that “dividend-pay-
ing companies with consistent dividend
increases” have stood out this year
against other dividend strategies. The
S&P 500 Dividend Aristocrats, for ex-
ample, have returned about 7.5%, though
they were only up about 1% through
Nov. 6. (For more on the Aristocrats,
which have paid out a higher dividend
for at least 25 straight years, see the In-
come Investing column on page 38.)
Meanwhile, Smith of Haverford Trust
calls this environment an “an excep-
tional opportunity for investors to own
high-quality companies with good pros-
pects that pay better than bond yields.”
One of the firm’s strategies focuses on
stocks with above-average yields, such
asHome Depot(HD) at 2.2%,PepsiCo
(PEP) at 2.8%, and money manager
BlackRock(BLK) at 2%. The strategy,
which yields 3.2%, has returned about
3% this year.
Even if the value rally continues,
Golub warns against chasing the highest
yielders. “Under normal circumstances, a
dividend-yield strategy is a defensive
strategy for people thinking about long-
term stable income,” he says. But “when
you leave a recession, these stocks be-
come very cyclical and speculative.”B
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