Growth Stocks and Dividends: A Winning Combination
03/21/2014 | Investment Insights
After years of taking a back seat in the minds of growth investors, dividends have once again become an increasingly important component of total returns. We see an increasing number of growth companies establishing first-time dividend payments or growing their dividend commitments. The trend is of particular importance for yield-hungry investors, who need steady sources of income in their portfolios to meet retirement or other current income needs. As interest rates rise, we think growth companies that pay dividends are in a unique position to meet the needs of these investors, as companies that can grow earnings and free cash flow can increase their dividend payments and offset the erosion of principal in a rising rate environment. This paper provides insight into this trend and why we believe the most attractive large-cap growth opportunities reside with companies that strike the right balance between dividends and other uses of excess cash flow.