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Advisory Solutions Weekly Market Update

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Fixed Income Weekly Bond Market Review

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Equity Opportunities Weekly Market Recap

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The Lead - "Sustainable Dividends"

  • One of the most attractive features of finding companies with a stated goal of paying increased dividends over time is a long-term mindset aligned with that of investors seeking sustainable returns. 
  • This month, we demonstrate how stocks with five-year dividend growth rates of 9-15% have attractive S&P Global ESG rankings. This growth rate range is essentially in-line with the range of dividend growth that demonstrated relative outperformance within the Russell 1000® Value Index over the past ten years.
  • We also note that an investor may expect to receive a lower dividend yield to “pay up” for more sustainable companies, however this does not appear to be the case at present.

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Document Thumbnail: The Lead - Dividends: Active Vigilance


The Lead - "Dividends: Active Vigilance"

  • In a dividend growth strategy, the key is protecting the overall dividend growth rate by reducing exposure to companies that cut or eliminate their dividend.
  • Ned Davis Research notes that, from January 1973-August 2021, S&P 500® stocks that cut or eliminated their dividends both underperformed dividend growers by over 11% per year and actually generated a negative absolute return.
  • A high number of dividend cuts in the market tend to be rare but severe, and the challenge for long-term investors is that threats to ongoing dividend payment capacity can change.
  • As active managers within our dividend growth strategy, we would note that seven stocks we sold in our dividend growth strategy over the past seven years subsequently cut or eliminated their dividends, leading to underperformance versus the benchmark and, similar to the Ned Davis research, they are currently trading below our exit price.

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Document Thumbnail: The Lead - Dividend Growth Rate or Consistency?  Why Not Both?


The Lead - "Dividend Growth Rate or Consistency? Why Not Both?"

  • If a company demonstrated the ability to increase their dividend consistently over decades, is that more important than the rate of annual increase?
  • We assess the apparent trade-off between owning companies that raise their dividends at faster rates and those with a long track record of dividend increases.
  • We found the biggest detractor to performance for Dividend Aristocrats was a large overweight to consumer staples over the past ten years. 
  • Within Equity Income, we believe that owning strong dividend growers with proven track records while also providing proper diversification is an attractive combination to generate above-average returns with below-average risk for our clients over the long term.

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Investment advisory services are available through Sterling Capital Management LLC, a separate subsidiary of Truist Financial Corporation. Sterling Capital Management LLC manages customized investment portfolios, provides asset allocation analysis and offers other investment-related services to affluent individuals and businesses. Securities and other investments held in investment management or investment advisory accounts at Sterling Capital Management LLC are not deposits or other obligations of Truist Financial Corporation, Truist Bank or any affiliate, are not guaranteed by Truist Bank or any other bank, are not insured by the FDIC or any other federal government agency, and are subject to investment risk, including possible loss of principal invested.


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