Is income investing passé? Short-term investors might be forgiven for thinking so. Since the start of the pandemic, the headlines have all been about growth stocks and where they’re heading. But step away from the here-and-now and the extraordinary events of the past 12 months and the data tells a very different story.
While capital returns can contribute hugely to performance they also tend to be volatile. In contrast, dividends can play a far more consistent and steady role in value creation. Once the sugar rush of short-term market gyrations are spent, dividends can be the lifeblood of successful long-term investing – offering the potential for sustained upside in the good times and insulating against the worst of the drawdowns in the bad.
Now, with the prospect of stronger dividend growth ahead, we believe more than ever that the compounding of investment returns via income reinvestment can be a powerful driver of performance.
The Global Income team, Newton Investment Management.
Doc ID: 585651