We have long been advocates of companies that have demonstrated the ability to raise dividends consistently through the full business cycle. The questions is, could rising longer-term government bond yields lead to underperformance for such equities?
As we have noted previously, we do think that a tightening labour market on both sides of the border will result in accelerating wage growth in the coming quarters. This, together with higher oil and commodity prices, should support higher inflation expectations and longer-term government bond yields. Nonetheless, even as longer-term sovereign bond yields become more competitive with dividend yields, we believe that stocks with a track record of dividend growth can continue to perform well for the following reasons:
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