Why invest in dividends when there is high inflation?

Week in red in most stock markets, except for some Asian ones, with the falling -3.83%, -2.86%, -4.60%, -4.83%, -4.88 %, -6.70%, -5.05%, -4.58%, -5.60% and saves +0.23% and CSI +3.65%.

The S&P 500 sank capping its ninth week down from 10, led by a sell-off in tech stocks as consensus firmed that the Federal Reserve will need to double down on monetary policy tightening.

The ranking so far this year is as follows:

– British Ftse -0.91%

– Japanese Nikkei -3.36%

– Spanish Ibex -3.71%

– German Dax -13.37%

– French Cac -13.50%

-Dow Jones -13.61%

. Chinese CSI -14.20%

– Eurostoxx -16.27%

– Italian Eb -17.55%

– S&P 500 -18.16%

-Nasdaq -27.52%

Investor Sentiment (AAII)

– Bullish sentiment (expectations that stocks will rise in the next six months) fell 11 points to 21%. It remains below its historical average of 38%.

– Bearish sentiment (expectations that stocks will fall in the next six months) increased 9.8 points to 46.9%. This rise puts pessimism back at an unusually high level. It remains above its historical average of 30.5%.

Why go to dividends when there is high inflation

With inflation soaring, many investors are seeking refuge in dividends, as they have traditionally provided protection. Just look at how dividend growth has historically outpaced inflation. For example, dividends paid out by components of the S&P 500 rose from $140.1 billion in 2000 to $511.5 billion in 2021, a compound annual growth rate of +6.4%.

Well, the S&P Dow Jones Index recently (in May) launched the S&P 500 ESG Dividend Aristocrats Index, joining the Aristocrats group of indices.

The 10 largest holdings in the new index launched in May are:

  • Albemarle Corp (NYSE:)

  • Exxon Mobil Corp (NYSE:)

  • Chevron Corp (NYSE:)

  • Amcor (NYSE:)

  • Franklin Resources Inc (NYSE:)

  • Expeditors (NASDAQ:)

  • Afla (NYSE:)

  • Illinois Tool Works (NYSE:)

  • Air Products (NYSE:) & Chemicals

  • Genuine Parts Co (NYSE:)

By sectors, the largest exposures are:

  • Consumption 26.1%

  • Materials 14.7%

  • Industry 13.9%

  • Health 13.5%

Apart from this new index, let us remember that the main index of aristocratic dividends (S&P 500 Dividend Aristocrats) is today made up of 65 companies that increase their dividends every year without interruption, companies that have distributed more money per share every year. In January, the companies Brown & Brown (NYSE:) and Church & Dwight (NYSE:) joined the index and AT&T (NYSE:) left.

Over the last decade, the index has a total annual return of +14.15%.

The 2 main sectors by weight are industrial and consumer with a total weight of 40%.

To be part of this index, you must meet requirements such as:

So far this year, both the new S&P 500 ESG Dividend Aristocrats and the classic S&P 500 Dividend Aristocrats have outperformed the S&P 500 by 7.02% and 6.89%, respectively.

Intervention drums with the yen crash?

The yen continues to sink and has already fallen to levels not seen in more than 20 years against the dollar.

The main reason we already know is the divergence of the monetary policies of the Federal Reserve and the Bank of Japan. The first raising interest rates, the second not moving tab.

This divergence is due to the fact that in the United States inflation continues to rise like foam, while in Japan it is much lower.

And it is that the objective of the Bank of Japan is to maintain very low interest rates to reactivate inflation after years of avoiding deflation.

But the intense collapse of the Japanese currency gives rise to some suspicion or doubt as to whether or not the Bank will end up intervening in the foreign exchange market. Meanwhile, the entity’s governor continues to say that it is too early to reduce monetary easing and raise interest rates.

In any case, if it finally intervenes to give some strength to its currency, we would be facing the first event of this magnitude in the last 24 years, when Japan and the United States coordinated to make huge purchases of . But if Japan did it now, it would not be in the favor of the US, quite the contrary.

In the chart we can see how it has just run into a strong resistance after the strong accumulated rise.

Revlon (NYSE:) sinks on the stock market due to its bankruptcy

Revlon

Cosmetics giant Revlon is preparing to file for bankruptcy this week as it battles supply chain problems and a heavy debt load. The company has more than 3,000 million dollars of debt and has avoided several defaults thanks to agreements with creditors.

Sales had declined years before the pandemic, which also hit the company hard.

On Friday the stock market fell -52.77%. It was trading at $563 in 1998 and is now trading at $2.05.

Raw materials in the last 12 months:

  • +178%

  • Gasoline +92%

  • +71%

  • +62%

  • +58%

  • +57%

  • +47%

  • +11%

  • +11%

  • -twenty-one%

  • -51%

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