formerly Realindex Investments
Leader in active quantitative equities across Australian equities, global equities, emerging markets and global small companies.
Backed by a unique blend of research, portfolio construction and risk management, focused on uncovering original insights and translating them into investment strategies that are active and systematic, aiming to generate alpha.
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Insights
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Insights
Does tilting towards dividend payments deliver excess returns?
In an inflationary environment that is turning up the demand from income investors searching for dividend yield, Realindex considers the anomaly of the price of a dividend-paying stock drifting up prior to the dividend payment date and the ex-dividend price drop off.
Our finding? While large cap, high yield stocks remain popular there may be other opportunities to exploit. When constructing an income portfolio, there is more to consider than simply maximising dividends and franking. For example, our analysis suggests various ways to implement dividend run up as an alpha source to generate excess returns to the market:
- Both dividend run up and drop off effects are larger in small caps
- Both high (good value) and low yield (more expensive) stocks show larger dividend run up than for intermediate yield firms
- For low yield stocks, the drop off effect is smaller than intermediate and high yield stocks.
These features are worth considering for those investors seeking to maximise the dividend run up phenomenon.
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This material has been prepared and issued by First Sentier Investors (Australia) IM Ltd (ABN 89 114 194 311, AFSL 289017) (FSI AIM, Realindex), which forms part of First Sentier Investors, a global asset management business. First Sentier Investors is ultimately owned by Mitsubishi UFJ Financial Group, Inc (MUFG), a global financial group. A copy of the Financial Services Guide for FSI AIM is available from First Sentier Investors on its website.
This material is directed at persons who are ‘wholesale clients’ (as defined under the Corporations Act 2001 (Cth) (Corporations Act)) and has not been prepared for and is not intended for persons who are ‘retail clients’ (as defined under the Corporations Act). This material contains general information only. It is not intended to provide you with financial product advice and does not take into account your objectives, financial situation or needs. Before making an investment decision you should consider, with a financial advisor, whether this information is appropriate in light of your investment needs, objectives and financial situation.
Any opinions expressed in this material are the opinions of the individual author at the time of publication only and are subject to change without notice. Such opinions: (i) are not a recommendation to hold, purchase or sell a particular financial product; (ii) may not include all of the information needed to make an investment decision in relation to such a financial product; and (iii) may substantially differ from other individual authors within First Sentier Investors.
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