BofA expects demand for dividend stocks
2022.12.30 12:36
BofA expects demand for dividend stocks
Budrigannews.com – BofA analysts wrote to clients on Thursday that investors should “stick with it” and that value would prevail in 2022.
“While value factors (+5.1 percent on average) lagging Growth factors (up 6.0% from average) The analysts wrote, “So far in 2022, Value remains ahead of Growth (-3.7% vs. -4.0%, respectively) in November.”
According to the analysts, 73% of the nearly 50 quantitative factors BofA followed outperformed the equal-weighted S&P 500 in 2022, making it “marked by broad market leadership.” In addition, the index was led by all value factors, with the exception of the high EPS yield.
“There are a number of good reasons to stay with Value: They added, “
1) Growth remains stretched compared to Value on most valuation metrics compared to history.
2) Value remains deeply underweight by active managers (Exhibit 39).
3) Value led Growth for three months prior to the recession (more below) and up to twelve months after,
4) Value led Growth for twelve months after the Fed stopped hiking.
5) Value fared well during periods of heightened rates volatility.”
They also think it’s important to choose carefully; Dividend stocks will continue to be in high demand; and “duration will probably continue to be under pressure.”
“With a lead of 17.1 points over the index, dividend yield was the third best factor overall YTD. This was its second best outperformance margin for the January to November period since 1987.” “Returning to historical norms would imply that >50% of total returns will be from income versus 14% today,” the analysts continued. “Dividends’ contribution to total returns has lagged over the last decade.” Given the low valuations and low institutional ownership, demand for dividend-paying stocks ought to continue to rise.”
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