As I’ve previously discussed, the Federal Reserve’s zero-interest-rate policy has “pushed” many investors—especially those who use a cash-flow approach as opposed to a total-return approach—to look to stocks and equity funds that have a high dividend yield; that is, that have a low price-to-dividend ratio.
Adding to their attraction is that a high-dividend strategy has outperformed the market over the long term. And this has been true around the globe.
However, it’s long been known that a high-dividend strategy is basically a value strategy, one that correlates highly with value strategies such as buying stocks with low prices-to-book value, earnings, sales or cash flow. The question then is, Is a high-dividend strategy the best, or even a good, value strategy?
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