Portfolio manager Don Newman explores the key trends in dividend investing as countries look toward lifting lockdown restrictions and companies seek to return their balance sheets to pre-crisis levels. In Don’s opinion, the 45% run-up on the S&P 500 Index had a few key drivers, such as optimism related to reopening the economy, and the monetary policy response from central banks. For example, the Federal Reserve added about $3 trillion to its balance sheet in order to provide liquidity to the market, and to push people into risk assets. It was also driven by fiscal stimulus of about $200 billion in Canada, which helped stabilize consumer spending. Don is looking for companies with less-than-optimal leverage on their balance sheets, that won’t spend the next couple of years paying off debt and that can continue to grow, as well as companies with sustainable dividends that will continue to trade at premiums. Don believes share buybacks will be off the table for several companies for some time, because it doesn’t look good to lay off workers and then buy back stock. He believes dividends may replace buybacks over the next couple of years.
Recorded on June 25, 2020.