Dividend Growth Strategies Face a Higher Hurdle

Dividend Growth Strategies Face a Higher Hurdle

Dividend growth is back on the agenda for portfolio managers as payout growth, free cash flow and valuation changes the risk calculus.

Dividend growth remains attractive for long-horizon investors, but the market is demanding more evidence that payouts are covered by free cash flow. Companies with stretched balance sheets are being penalized.

Quality of the payout matters more than the current yield in a higher-rate environment.

The main risk is slower dividend growth and rising payout ratios. Investors should watch free cash flow, payout ratios and dividend growth guidance in the sessions ahead.

This article is provided for information and educational purposes only and does not constitute investment advice. Market conditions can change, and past performance is not a guarantee of future results.