Yes, Dividends. Almost Always.

Why dividends?  Jeremy Schwartz has done a lot of great work on the topic building on the groundbreaking research from his colleague at WisdomTree, Prof Jeremy Siegel (yes, your name has to be Jeremy to get a job at WisdomTree, I checked).

Anyway, Ritholtz and I have been constructing our secular bear market core portfolios almost exclusively with dividend-weighted ETFs since January 2011 (before everyone else went nuts for dividends) whenever we do indexes.  In a secular bear, you don’t want cap-weighted or price-weighted indexes, you want yield and relative value more than you want price momentum.  This changes a bit in a lasting bull market, but we ain’t there yet.

Here’s a great explainer of how powerful high dividend payers can be versus the rest of the market from the aforementioned Jeremies:

(click to embiggen!)

No one is saying dividends always work, but in a period like this why wouldn’t you want to select for them in a passive portfolio?  This is the kind of thing that separates good asset management from scattershot portfolios with no clear objective.






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