I'm Daniel Peris, Senior Vice President and Senior Portfolio Manager at Federated Hermes.
Does the dramatic shift in the economy afford new opportunities to dividend investors?
Yes. And we're certainly spending a fair amount of time looking for those opportunities. The market's downdraft did give us a look at some companies that historically we wouldn't have access to, but whose business models are consistent with what we like to do, recurring revenue, relatively high payout ratios, stable businesses. Some of those companies, just because the yields have been too low for us in past go throughs or cycles now, well, now we've gotten a look at them and we're continuing to look at them. So although it has been a minor part close to zero for various points in time of the portfolio, information technology, this information technology sector, it is fair to say that we're looking closely at information technology currently to see if we can slot anything in.
And the reason I say say that is because it's quite clear to everyone who's watching, who's participating who's sitting at home watching this broadcast and all of the other communications that are occurring with new technology, that much of this new technology is here to stay, and that our behavior patterns are going to change. There may well be less travel, there will be more online communications, and that to the extent that we can participate that in a cash flow generative manner, we certainly will. So we are excited about that. That's probably the most dramatic opportunity that we have. But I would also say that this general downdraft in the economy and in the market has provided the opportunity to increase maybe the quality some lower yielding companies higher quality, even better balance sheets than we've had in the past. And so we've been able to top off positions like those or even start some say in the healthcare sector. And that has also been I think, helpful for creating an income stream and a portfolio that will be durable in a difficult economic period.
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. 20-30181 (5/20)