Point of View With Bob Shearer and Tony DeSpirito

After years of turning to dividend stocks for income in a low-interest-rate world, investors are wondering if the long-lucrative ship has sailed. To the skeptic’s mind, stocks are expensive after a six-year bull run, not to mention increasingly volatile. And those that pay dividends are likely to suffer the same fate as bonds (price losses) when interest rates rise. Bob Shearer and Tony DeSpirito, co-portfolio managers of the BlackRock Equity Dividend Fund, poke holes in this thinking, pointing to some powerful contradictions that make dividend growth stocks a compelling investment opportunity today.

  • All dividend stocks are not created equal. There are clear distinctions that set dividend growers apart from other dividend stocks. Among them: The highest-yielding stocks ("bond proxies") might be expected to follow the bond market down when rates rise, but stocks with a history of dividend growth have tended to outperform in a rising-rate environment.
  • Below-market volatility. Dividend payers in the S&P 500 Index historically have outperformed non-dividend payers over the long term with less volatility. And dividend growers, which tend to be quality companies, generally show greater resilience in unsteady markets.
  • Lower prices for higher quality. The investor hunger for yield has the market placing a premium on the highest-yielding stocks. Dividend growth stocks tend to be higher quality and are inexpensive compared to those options. They are also cheap relative to both the broader market and their historical averages.

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This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are those of the portfolio managers profiled as of November 2015, and may change as subsequent conditions vary. Individual portfolio managers for BlackRock may have opinions and/or make investment decisions that may, in certain respects, not be consistent with the information contained in this report. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader

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