Live Markets: Dividend growth strategy may help combat volatility - BMO

Everest

17/01/2025 16:59

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    DIVIDEND GROWTH STRATEGY MAY HELP COMBAT VOLATILITY - BMO 
    Since scoring its record highs late last year, the S&P 500
index  .SPX  has been struggling to shake off its December
weakness. If fact, prior to this week, the benchmark index
posted losses in four of the five past weeks. 
    "It seems like the 'good news is bad news' narrative has
taken over again since a series of stronger-than-expected
economic data points has put a damper on aggressive market
expectations for multiple Fed rate cuts this year and has
resulted in a sharp increase in bond yields." writes BMO Capital
Markets chief equity strategist, Brian Belski, in a note out on
Wednesday.
    He adds "This has obviously raised the anxiety quotient
among investors, particularly considering valuation levels.
Nonetheless, we remain confident in our bullish outlook for 2025
and have not seen any material changes in the fundamental
backdrop of US equities yet to suggest there is significant
trouble on the horizon."
    Nevertheless, given current market dynamics, in Belski's
view, price swings and bouts of volatility will become more
frequent in the coming months.
    As such, BMO believes a dividend growth strategy is one way
to potentially navigate current and anticipated conditions.
    "Our work shows that a strategy focused on dividend growth
stocks has outperformed in a variety of market environments and
can benefit those investors looking to protect portfolios, as
well as those investors looking to bolster performance.
    BMO's dividend growth methodology involves screening S&P 500
stocks at month-end for the following factors:
    * No dividend cuts in the past five years
    * Latest one-year dividend per share growth greater than the
S&P 500
    * Current dividend yield > than the S&P 500
    * Free cash flow yield greater than the dividend yield
    * Dividend payout ratio < than the S&P 500
    Among the current list of stocks passing the screen, and as
of Wednesday were rated "outperform" by BMO, include: CF
Industries  CF.N , CSX Corp  CSX.O , Cincinnati Financial
 CINF.O , Domino's Pizza  DPZ.O. , Hess Corp  HES.N , Marathon
Petroleum  MPC.N , and Everest Group  EG.N .
    
    (Terence Gabriel)
     *****
    
    
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