Where Will Investors Find Dividends in 2017?

Technology is still the fastest growing sector in terms of dividend growth, however the dividend advantage is seemingly dissipating when looked at on a five-year rolling basis

Dan Kemp 28 December, 2016 | 1:56PM

For income-focused investors, the question of intelligent diversification becomes which sector style would you prefer to own? The defensives – which include healthcare, utilities and consumer staples – are the tortoise. The cyclicals – materials, consumer discretionary, financials and real estate – are the hare. And lastly, the sensitives – telecommunications, energy, industrials and technology – are somewhere in between.

Dividends Among Cyclicals and Sensitives

Digging a layer deeper, we find payout growth is very segmented. For example, the sensitives super-sector is dominated by growth in technology dividends, which have expanded rapidly from very low levels.

Going forward, it is worthwhile asking whether technology can be expected to continue growing at rapid rates. If it can, this higher payout growth should be reflected in valuation calculations. One issue we face is that the growth rate for dividends appears to be slowing across all sectors. We can see that technology is still the fastest growing sector in terms of dividend growth, however the dividend advantage is seemingly dissipating when looked at on a five-year rolling basis.

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About Author

Dan Kemp

Dan Kemp  is Chief Investment Officer, Morningstar Investment Management EMEA

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