Dividends

Dividends in the Current Environment

The COVID-19 pandemic and its effect on the market has brought dividends to the top of many investor’s minds. Will dividend paying companies be able to sustain their payouts in the face of an economic slowdown? Should they bow to political and societal pressure to cut or suspend their dividends? With bond yields at historic lows, dividends take on even more importance for those investors in need of income. How will these pressures affect the outlook for dividends? Epoch has a long history of expertise investing in dividend paying companies in our Shareholder Yield strategies and has recently produced a plethora of insights on the topic, collected below.
       
Webinar – April 30, 2020   Podcast – April 16, 2020  
The Death of Dividends: Greatly Exaggerated Not All Dividend Cuts are the Same  
 
Epoch’s thought leaders address pressing questions about the state of dividends in the current environment.   Shareholder Yield PM John Tobin discusses how COVID-19 related economic, political, and social pressures have led some to either cut or suspend their dividends.  
       
Edited Transcript – April 30, 2020    Spotlight – April 15, 2020  
The Death of Dividends: Greatly Exaggerated  What is Quality Yield?
   
 A summarized transcript of the recent webinar on dividends.   Shareholder Yield PM Kera Van Valen on why quality yield is important in the current environment.  
       
Webinar Presentation Deck – April 30, 2020   Quarterly Investment Update – May 1, 2020  
The Death of Dividends: Greatly Exaggerated The Outlook for Dividends in a World of Yield Starvation
   
Presentation slides from the recent webinar on dividends.   Executive Chairman and Co-CIO, Bill Priest explores the outlook for dividends and why they are even more essential today.  
       
Post Webinar Q&A – May 8, 2020   Bloomberg Radio Interview – April 27, 2020  
The Death of Dividends: Greatly Exaggerated   Not All Companies Should Cut Dividends 
   
Questions from the audience answered by our experts after the recent webinar on dividends.   Shareholder Yield PM John Tobin argues for a more nuanced approach to whether companies should cut their dividends in the current environment.  
       
Letter – April 6, 2020   Insights – May 1, 2020  
Not All Dividend Cuts are the Same Factors: Not Driving, Just Along for the Ride
In the COVID era, not all dividend cuts are created equal. It is important to pay attention to how real economic events drove recent performance, rather than fall back on a set of abstract factor returns.

Our Perspectives

There have been two monumental crises in the past two decades, the Global Financial Crisis and the current COVID-19 pandemic. While the COVID-19 crisis is crippling financial markets in a similar fashion, monetary policy in the form of QE will not be the silver bullet we need. The solution to the current crisis will require prudent fiscal policy to see us through.

March 16, 2020

Comparing Two Market Crises: A New Type of Crisis Requires a New Solution

There have been two monumental crises in the past two decades, the Global Financial Crisis and the current COVID-19 pandemic. While the COVID-19 crisis is crippling financial markets in a similar fashion, monetary policy in the form of QE will not be the silver bullet we need. The solution to the current crisis will require prudent fiscal policy to see us through.

The dispute between the U.S. and China is clearly not just about trade, or even technology. At stake are the values that will determine the architecture and governance of the global world order.

December 2, 2019

Cold War 2.0: The Platform, the Players, and the Stakes

The dispute between the U.S. and China is clearly not just about trade, or even technology. At stake are the values that will determine the architecture and governance of the global world order.

The current hype about two-sided digital platforms, blitzscaling and winner-takes-most markets has fueled a surge in IPO listings and produced stratospheric valuations that are difficult to reconcile with free-cash-flow (FCF) fundamentals. The big question is, are we repeating the excesses of the dot-com boom? In this paper, we look at the reasoning used by those who think history is repeating itself including IPO supply, profitability and VC funding. We also look at the weaknesses in those arguments and why some believe that the current situation is different from the dot com bubble, such as median age of tech IPOs and sales growth. Finally, we explore how investors can look at these companies through a free cash flow lens.

June 19, 2019

Blitzscale and Hope: Unicorns, IPOs and the Fear of Repeating the Late 1990s

The current hype about two-sided digital platforms, blitzscaling and winner-takes-most markets has fueled a surge in IPO listings and produced stratospheric valuations that are difficult to reconcile with free-cash-flow (FCF) fundamentals. The big question is, are we repeating the excesses of the dot-com boom? In this paper, we look at the reasoning used by those who think history is repeating itself including IPO supply, profitability and VC funding. We also look at the weaknesses in those arguments and why some believe that the current situation is different from the dot com bubble, such as median age of tech IPOs and sales growth. Finally, we explore how investors can look at these companies through a free cash flow lens.

Does a stock’s price and its P/E ratio tell you how much a company is worth? Conventional wisdom says yes, but we think otherwise. In this paper we explore:

  • The theory behind the discounted cash flow (DCF) valuation model and the underappreciated role that ROIC plays in the model
  • The P/E ratio and find that it does not tell us what most people think it does, nor does its offshoot, the P/E to growth (PEG) ratio
  • How we can use what we have learned about the DCF model to deconstruct P/E ratios in the real world to better understand what they do tell us
June 17, 2019

The P/E Ratio: A User’s Manual

Does a stock’s price and its P/E ratio tell you how much a company is worth? Conventional wisdom says yes, but we think otherwise. In this paper we explore:

  • The theory behind the discounted cash flow (DCF) valuation model and the underappreciated role that ROIC plays in the model
  • The P/E ratio and find that it does not tell us what most people think it does, nor does its offshoot, the P/E to growth (PEG) ratio
  • How we can use what we have learned about the DCF model to deconstruct P/E ratios in the real world to better understand what they do tell us

If there is a “small-cap effect” then why has the Russell 2000 underperformed the Russell 1000 over time?

January 18, 2019

The Size Paradox

If there is a “small-cap effect” then why has the Russell 2000 underperformed the Russell 1000 over time?

China’s mercantilist behavior, underscored by its “Made in China 2025 initiative,” is in conflict with U.S. demands for greater IP protection, a level playing field and improved market access. Left unresolved, free trade and globalization will be in retreat, with broad economic implications beginning with manufacturers.

December 10, 2018

Trump, Tech and Trade

China’s mercantilist behavior, underscored by its “Made in China 2025 initiative,” is in conflict with U.S. demands for greater IP protection, a level playing field and improved market access. Left unresolved, free trade and globalization will be in retreat, with broad economic implications beginning with manufacturers.

Three developments (the unwinding of QE, the soaring US budget deficit and the impending wall of maturities, especially of corporate bonds) will engender higher volatility and wider credit spreads. There is also a risk that interest rates will start rising for “bad” reasons (that is, an increase in fixed income supply). Each of these outcomes would be a headwind for high duration strategies.

July 2, 2018

The Return of Price Discovery

Three developments (the unwinding of QE, the soaring US budget deficit and the impending wall of maturities, especially of corporate bonds) will engender higher volatility and wider credit spreads. There is also a risk that interest rates will start rising for “bad” reasons (that is, an increase in fixed income supply). Each of these outcomes would be a headwind for high duration strategies.

Modern Portfolio Theory (MPT) dominates investment thinking today, but the pre-MPT view of the world still holds valuable insights. Our new white paper explores the limits of MPT in aiding successful investing.

April 13, 2018

The Limits of Theory

Modern Portfolio Theory (MPT) dominates investment thinking today, but the pre-MPT view of the world still holds valuable insights. Our new white paper explores the limits of MPT in aiding successful investing.