(NB) As investors continue to navigate greater volatility and higher interest rates, we believe dividend investing should play an even more important role in building resilient equity portfolios.
There has always been a strategic case for investing in dividend-paying equities. Dividends can account for a significant portion of total investment returns and offer advantageous tax treatment, while companies that can consistently afford to pay them tend to be larger, blue-chip businesses with strong fundamentals.
As investors continue to navigate greater volatility and higher interest rates, we believe dividend investing should play an even more important role in building resilient equity portfolios. In a rising-rate environment, valuations of dividend-paying stocks tend to hold up better than their growth counterparts which often generate more of their earnings in the future—and discounting those future earnings at higher rates lowers their present value.
Indeed, dividend stocks—particularly those of high-quality companies with dependable profits, sturdy balance sheets and disciplined capital management—have shown recent strength: Between January 2021 and April 2023, the MSCI USA High Dividend Index outperformed the MSCI USA Index by an annualized 2.21%.1
It is clear, in our view, that the Federal Reserve has shown its commitment to combating inflation, and that the historic era of easy money that propped up equity markets after the Global Financial Crisis is now over. That’s why we believe investing in high-quality, dividend-paying companies with proven businesses has the potential to be a sound strategy in this new economic regime.
Offerings
The NB CDI™ platform offers investors a suite of diversified dividend portfolios aiming to capture the themes of dividend investing while offering client customization.
| NB CDI™ Messinger Equity Income | NB CDI™ US High Quality Dividend | NB CDI™ US Large Cap Income Tilt | |
| Concentration | Broadly Sector Diversified | Broadly Sector Diversified | Core equity exposure |
| Investment Style | Active | Quantitative | Factor Tilt |
| Yield (%)* | 3.02 | 3.28 | 2.15 |
| Target Audience | Investors seeking active fundamental stock selection focused on dividend equities | Investors seeking a repeatable process based on quantitative dividend and quality metrics | Investors seeking performance in line to the broad market but with a moderately higher yield |
* As of March 31, 2023. Source: Bloomberg, Aladdin
The above dividend strategies can be implemented in an NB CDI™ separately managed account (SMA) while overlaying tax-management with the potential to optimize client after-tax returns, facilitating a tax-efficient transition of appreciated stocks positions, or while incorporating personal values. Combining a thoughtful dividend approach with client customization allows for an investment portfolio aligned to each client’s investment objectives.
