But there is a reason behind all this maudlin commentary. BlackRock says when it comes to investing many retirees will first look for income.
"Having a predictable and lasting income stream is crucial for paying bills and peace of mind," and "This hunger for income comes at a time when traditional hunting grounds offer less game or have completely vanished. The yields of many top-rated bonds are at record lows.
Some actually lose value after factoring in inflation. Some others are too good to be true or too scary to touch."
It’s not all bad news, however. Surveying the current landscape for dividend investing, BlackRock concludes the following:
- High-dividend stocks tend to outperform most other assets in periods of low or no economic growth – exactly where we are now.
- Dividend growth historically has kept up with all but the most extreme inflation environments.
- There is potential for dividend growth: US and European payout ratios are at lows while companies are accumulating record cash piles.
- Fund flows show dividend investing has momentum but still plenty of room to grow.
Additionally, even for investors not focused on income, dividend stocks offer advantages for long-term capital growth, since:
Dividend growth has been a key driver of total return in the long run.
Reinvesting dividends has made all the difference in boosting long-term equity returns.
High dividend stocks have tended to do better than other shares in both bull and bear markets.
Certainly among those people I’ve talked to, both on the advisory and the fund management side of the industry, there is an awareness of the hunger for yield.
This has intensified in recent years because of lower growth forecasts, and as a result of managing investors’ expectations.
While it is unreasonable to expect the same year-on-year growth and/or returns in the stunted post financial crisis era, targeting steady dividends or income might be a good way of pacifying investors.
Recent research from Indxis shows large-caps continued to dominate an index of the most consistent dividend-paying stocks.
These companies provide the basis of its UK Dividend Achievers Index which produced an annualised return over 12 months to 31 January of 5.32%, outperforming its MSCI benchmark by 3.81%. Using back-testing Indxis can also see the returns over the past three years would have been 21.86%, 3.2% over its benchmark.
In a low to no growth market an annualised return of 5.32% cannot be considered shabby.
Additionally, the consumer goods companies that largely make up this index (such as SABMiller, Diageo, Unilever, British American Tobacco and Tesco) have the added bonus of appealing to investors because of their familiarity.
Each of the stocks in the index have increased their annual dividend payments for the last five or more consecutive years, and were also screened for liquidity and investibility.
Alan Price, sales director at Indxis, said: "In times like these it is crucial to trust in those companies that have consistently increased their dividends over five years or more when investing for income, instead of chasing large one-off payments that are often used to hide a deeper malaise within a company."
These names might not be sexy, but they offer a certain amount of stability, which there is certainly no excess of at the moment.
