Video 4Q19: The new "bond proxies"


With ever-lowering bond yields, other asset classes have risen to be the next "bond proxies"
Chief Investment Office05 Nov 2019
Photo credit: AFP Photo


 

The DBS Chief Investment Office likes dividend-yielding stocks, especially in world of disappearing bond yields.

Why is DBS so positive on dividend stocks?

As the trend of ever-lowering bond yields continues on the back of a renewed cycle of policy easing by global central banks, other higher-yielding asset classes have risen to be the next “bond proxies”.

Today, the UST 10-year yield is at a near-historic low of 1.5%, while European and Japanese government yields are in the negative zone. This certainly enhances the attractiveness of other instruments including EM and HY bonds on the other end of the bond spectrum, as well as equities that pay attractive and sustainable dividends.

When held over a market cycle, dividend-yielding equities stand out as having the characteristics of both equity and fixed income markets due to the constant stream of cashflow from dividends. Thus, they demonstrate lower volatility vis-à-vis the overall equity market.

Dividend-paying stocks are also believed to have more resilient earnings with steady businesses, good capital management policies, and that they embrace creating shareholder value. Strong price support from longer-term investors also dampens share price volatility.


Click here to read the full Theme 1: New "bond proxies" report.

Click here to watch our 4Q19 outlook video.

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