Income: Looking at Low-Vol

Written by: Global Thought Leadership | October 06, 2017

Source: Bloomberg, as of 10/2/2017. Past performance is no guarantee of future results. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges. This information is provided for illustrative purposes only and does not reflect the performance of an actual investment. 

The Bottom Line

  • While it’s the prospect of more stable returns that typically draws investors to low-vol equity strategies, income-seekers may be pleasantly surprised by the dividend component built into many of those strategies.
  • With its yield now topping 4%, the S&P 500 Low Volatility High Dividend Index leads both the S&P 500 and Russell 3000 – as well as the major U.S. bond index, the Bloomberg Barclays Aggregate.
  • Obviously, that does not apply to every low-vol, high-div strategy. Active managers may choose to balance the volatility and income elements in different ways. But it is indicative of the income potential inherent in this approach.
  • It’s important to note that dividends, in this context, can be one of the key indicators of a company with a good balance sheet and solid long-term prospects.
  • In principle, those firms’ stocks should tend to be less vulnerable to spikes in volatility than companies with weaker fundamentals.
  • Or as James Norman, President of QS Investors, puts it: “high-quality companies with [solid] cash flows, and which are expected to have those cash flows going forward, are typically stocks that people go to in times of stress.”
  • That helps to explain why these strategies are able to exhibit less variation in performance than equities in general -- as reflected in the lower standard deviation of the Low Volatility High Dividend Index – while providing a yield well beyond that of the U.S. Aggregate Index. 

Note: Dividends represent past performance and there is no guarantee they will continue to be paid.

1 Source for all data is Bloomberg.


IMPORTANT INFORMATION: All investments involve risk, including loss of principal. Past performance is no guarantee of future results. An investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges.

Equity securities are subject to price fluctuation and possible loss of principal. Fixed-income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.

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