I'm Daniel Peris, Senior Vice President and Senior Portfolio Manager at Federated Hermes.
In light of current conditions, how are you thinking about dividend investing?
Well, certainly dividend investing is changing as we speak, the current situation, circa 2020, is that, while we normally, for over the past two decades have sought to generate dividend growth off of a high base, the reality of the situation now, for 2020 at least, not necessarily beyond, is just protecting the dividend. Making sure that our clients, our ideal client, Grandma, who is dependent upon the dividends that we generate, that Grandma continues to receive most, if not all of the dividends that were harolded, as it were, at the beginning of the year, given our yield, depending on the particular product. The economy shut down, there are many challenges to the dividends, but we continue to invest in companies, maintain positions in companies where we believe the dividends can be sustained, and can rebound, if not this year, then certainly over the next couple of years. And in the meantime we're doing our best to really keep Grandma whole in terms of the income that the portfolio has historically generated.
What are you doing to adjust to current conditions?
The world changed dramatically. The economy was heading toward a slowdown early in 2020 to begin with. I think that's generally agreed upon. But it changed dramatically and as an active manager, I would encourage investors and financial advisors to use this opportunity to contrast active managers versus passive investment products. But active manager, we changed with the conditions. We had some cyclical elements to the portfolios, are we always are going to. We had some elements in the portfolio that were less set up for, say, energy crisis, where they are or the economy just shutting down as a general notion and so, we've removed them and put more defensive or other elements that are traditional to a defensive recession oriented portfolio. At this point in time, and again, it doesn't matter what particular date you're looking at, but at this point in time, we think this is a very good go forward portfolio, in terms of a, what you call it, a recession or just a period of low economic growth and the portfolio is oriented towards those types of defensive, non cyclical holdings that can continue to generate dividends in an adverse economic environment.
Disclosure: Views are as of April 21, 2020 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Past performance is no guarantee of future results. Stocks are subject to risks and fluctuate in value. There are no guarantees that dividend-paying stocks will continue to pay dividends. In addition, dividend-paying stocks may not experience the same capital appreciation potential as non-dividend-paying stocks. Federated Investment Counseling. 20-30171 (4/20)