Ranger International

Would knowing the timing of Fed rate hikes actually benefit equity investors?

There is a risk the popularity of smart beta has increased the valuations of certain types of stocks. These new higher valuations may subvert the premise that such characteristics lead to superior performance.

Japan and South Korea have long offered equity investors notoriously low yields. That may be about to change.

Recent research suggests the rule of thumb 4% distribution rate is far too high. If true, savers may want to consider adding dividend paying stocks to their portfolios.

A valuation measure called “shareholder yield” has gained credence among investors of late. While shareholder yield may be a one of many useful valuation measures, we caution against overemphasizing the metric. We are particularly concerned that the measure is indifferent to whether cash flow is spent on dividends or share buybacks, the latter being a questionable allocation of capital in our view.

In summarizing year-end results, company managements often boast about the cash they returned to shareholders through dividends and share repurchases. Certainly hiking the dividend by, say, 10% is something to crow about. But we fail to see why shareholders should applaud share repurchases. After all, they didnt see any of that money. The beneficiaries of buybacks are sellers of the stock. These arent shareholders, they are former shareholders.

Higher yielding stocks outperformed for much of this year, but fell sharply with the pop in interest rates.

For more than three decades, conservative investors have been able to count on Treasury bonds to deliver a consistent income stream, while providing a safe repository for principal. Further, Treasuries have anchored portfolios over their long bull run by limiting the damage when stocks declined.