How Companies Are Navigating Rising Cost Pressures
Hello my name is Darnell Azeez, Head of Value Equities at Lord Abbett and Portfolio Manager for Dividend Focused Strategies.
Title: Short term outlook for Equities
In the upcoming weeks myself and my team will be laser focused on the upcoming third quarter earnings season. We’ll be paying close attention to see if companies have been able to navigate the rising cost pressures that we've seen throughout the global economy. We’ll be looking for a few things. One, have companies been able to maintain margins by controlling costs on their end. Two, have company's been able to push through price increases to maintain their overall margin profile and have not gotten pushed back from their customers that tends to be a pretty good signal to the price elasticity of the product that they're offering or their economic or business most that they have. And lastly, as different investors will be paying close attention to any announcements of potential share repurchases or dividend increases.
You've seen a number of companies resume dividends or increase dividends over the past few quarters, and we think that that momentum will likely continue as corporate balance sheets look to be very healthy and as income dividend investors, we think that's a clear sign that that. That these companies are in better financial shape and they're willing to return money to shareholders and typically that's a good sign that that company is actually performing quite well. So those are the three things that that will be paying close attention to, and in the upcoming earning season.
Title: Why investors might consider dividends in a volatile market environment
When we think about a universe of companies that have increased their dividends over number of years what we find with these companies that they contain certain characteristics. One, they tend to offer better downside protection, they offer lower volatility, and they also give you similar market returns. And they do all that with a rising income stream now, why is this important? If you think about ways to build wealth within the equity markets it's typically about staying in the market right? So people will say time in the market, as opposed to timing the market. In fact, many studies have shown, if you exclude, the 10 most volatile days or biggest days of in the equity markets, the returns are rather dramatically different.
So when you have a universe of dividend growers, you are able to oftentimes get better sequence of returns and actually stay invested in the market. This is vitally important, because these companies have stable business models, they have a history of returning money to shareholders and, as mentioned earlier.
The stocks tend to perform or give you better risk adjusted returns in the overall market. And so it allows investors, particularly with a long term timeframe to stay invested in the market and benefit from capital appreciation and total return from dividends.
Thanks for watching. And thank you for your continued interest in Lord Abbett.
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