Behind the scenes

Question: Why is dividend growth important for the average investor?

Deborah Bickerstaff: Dividend growth is critical for the average investor. Again, I believe every portfolio should have an allocation to dividend-paying companies and especially those that can raise their distribution over time. And there's a multitude of reasons. First, the prospects of inflation are here. It's no longer a future problem. It is today. And a portfolio that can raise its distribution to that end client over time can help protect that client's purchasing power. But secondarily, we have found by looking at the history of the stock market, that the correlation between dividend growth and subsequent price appreciation is greater than 90%. So you have an opportunity with a dividend-paying and growing high-quality portfolio to provide a market-like total return where the initial total return is coming in that dividend check. We can look at the last 10 years, every time the S&P 500 has declined by 5% or more, 30 instances, in 25 of those instances, dividend-paying high-quality companies went down less to the tune of 3.6% on average. We don't have to be the next unicorn. We can play that steady defense and keep up and compete with the market, providing that market-like total return, but just taking a bit of a smoother path by not going up as much as the market, but of course critically not going down as much as the market. It's really important to remember that even if dividend-paying stocks, high-quality dividend-paying companies are not gaining a foothold in the stock market today, those investments are still working for you. Remember, these companies are characterized by having very strong balance sheets, high credit quality, durable cash flows that these companies can continue to pay you that resilient dividend income over time.