February 13, 2024
Take a Wise Approach to Dividend Investing
Markets have always been volatile, but these days volatility runs extremely high. We’ve endured a lengthy global pandemic, escalating geopolitical conflict and rising inflation that has led to soaring interest rates and worldwide economic challenges.
Faced with such difficult conditions, many people have become nervous about investing. While there’s no magic formula for people to invest without risk while achieving their wealth-building goals, some investment strategies are able to check more boxes than others.
A better approach to core investing
For instance, consider CI’s quality dividend growth solutions as a core portfolio component. For years, these products have helped investors reach their financial objectives with a disciplined and diversified approach to dividend investing. This approach, which comprehensively evaluates a company’s fundamental characteristics, is applied to Canadian, U.S. and international markets, giving investors a core Multifactor product with the ability to diversify geographically according to their portfolio needs.
Multifactor approach to core
Quality
High quality companies may be able to generate excess returns versus the market in the long run
Dividend
Rising yield environment necessitates the need and importance of dividend investing
Growth
Companies that can grow their earnings have the greatest potential to raise their dividends
Today, there’s a new way for investors to access this rules-based quality dividend growth methodology. CI has a broad shelf of innovative ETF solutions and now the popular Quality Dividend Growth suite is also available in the familiar mutual fund structure. Introducing our suite of CI Quality Dividend Growth mutual funds:
- CI WisdomTree Canada Quality Dividend Growth Index Fund
- CI WisdomTree U.S. Quality Dividend Growth Index Fund
- CI WisdomTree International Quality Dividend Growth Index Hedged Fund
Before discussing the specific benefits of these new mutual funds, let’s explore the three key factors underpinning the multi-factor strategy: quality, dividends and growth.
Quality factor
This factor targets operating profitability, often using “return on equity” (ROE) to measure quality. However, it’s an imperfect metric on its own since companies can take on more leverage to increase their ROE, which may also lead to more risk. The Quality Dividend Growth strategy corrects for this by considering “return on assets” in tandem with ROE to better assess the robustness of a company’s profitability. Quality companies tend to be more resilient when the economic environment weakens and market volatility rises.
Dividend factor
Dividend payers tend to profile as reasonably stable and profitable. This factor often uses backward-looking screens to help measure the sustainability of a company’s dividends. However, focusing only on historical data may exclude companies newer to paying dividends, or those poised to capitalize on a significant emerging trend. Our strategy addresses this issue by being forward looking, identifying companies that appear capable of maintaining their dividends while also showing dividend growth potential.
Growth factor
An effective way to determine dividend growth potential is to analyze a company’s earnings. This factor considers a number of operational data points through forward looking earnings growth estimates. The screen provides a dynamic metric to stay on top of trends and selects companies best equipped to grow their dividends.
Key benefits
CI Quality Dividend Growth’s focused, multi-factor approach provides targeted exposure to a given market – be it Canada, the U.S. or international – and captures growth potential for earnings and dividends. Within a specific market, each corresponding solution offers broad exposure to high-quality dividend growers in various industries and sectors, adding valuable diversification benefits (such as the potential for enhanced returns with lower overall risk) to an investment portfolio.
Each of our three new mutual funds leverages the same unique methodology that has made CI WisdomTree Quality Dividend Growth ETFs popular among advisors and investors alike. With these mandates now available as mutual funds, it empowers many advisors to expand their product universe when constructing robust portfolios for their clients. Also, since these funds are designed to be a core part of a diversified investment portfolio, advisors can help clients stay disciplined, focus on their long-term investment strategy and forgo the emotions in volatile times that may lead to poor investment decisions.
Learn more about the CI WisdomTree Quality Dividend Growth Index suite here.
About the Author
Blake Verdonk is an ETF Consultant at CI GAM and is responsible for helping grow the ETF business by executing the ETF sales strategy as well as supporting the ETF sales team. Blake graduated from the Ivey Business School at Western University with a degree in Honours Business Administration.
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