Income Opportunities: Alternative Sources

Adding unique investment solutions has the potential to boost yield and increase diversification

Alternative sources of income can come from a specialized sector, such as listed Infrastructure, a different approach to achieving dividend growth or identifying sources of income that go beyond domestic markets. These investment vehicles can provide investors the ability to further broaden their sources of yield and increase the potential to generate return in almost any market environment.

Regardless of the prevailing market condition, a good dividend strategy can help increase yield and protect future income. Research has shown that companies that tend to grow their dividends fair better in changing rate environments.

Dividend Growers Tend to Hold up Better in Rising Rate Environments

> bar chart - 10-Year Yield - Dividend Growers

All indices are unmanaged and unavailable for direct investment. Source: Bloomberg LP; AGFiQ as of November 30, 2018. Data based on quintile rankings of average factor returns during six-month periods when the U.S. 10-year treasury was rising/falling.

Identifying Companies that have a Greater Potential to Increase Dividends into the Future

Traditionally, focus has tended to be on a company’s ability to pay out a dividend or the priority placed on paying out a dividend. However, not enough focus is placed on the factors that can help predict ongoing dividend growth. There are more than 250 factors that have the potential to predict dividend growth over time. Reducing that to the factors or a combination of factors that have the necessary predictive power has become the new challenge.

> 5 donut charts - Factors

For illustration and educational purposes only. Not to be construed as investment advice. All indices are unmanaged and unavailable for direct investment. Source: Bloomberg LP; AGFiQ as of November 30, 2018. Data based on quintile rankings of average factor returns during six-month periods when the U.S. 10-year treasury was rising/falling.

Greater Diversification

Global listed infrastructure tends to be less correlated to traditional asset classes, providing the potential for greater yields and risk-adjusted returns.

5-year Correlation to Global Infrastructure

> bar chart - 5-year Correlation to Listed Infrastructure
Source: Morningstar Research Inc, as of December 31, 2018. Global Bonds represented by Bloomberg Barclays Capital Global Aggregate Index, US Treasuries by Bloomberg Barclays Capital Aggregate Bond Treasury TR Index, U.S. Equities by S&P 500 TR Index, Global Equities by MSCI World Index, Global Infrastructure by Dow Jones Brookfield Global Infrastructure Index. All indexes in USD unless otherwise stated.

Attractive Yields

Listed infrastructure may offer higher dividend yields due to greater predictability of long term cash flows

> circular infographic - Attractive Yields
Source: Morningstar Research Inc, as of December 31, 2018. Global Infrastructure represented by Dow Jones Brookfield Infrastructure TR Index (USD), Global Equities by MSCI ACW NR Index (USD) and Global Fixed Income by Bloomberg Barclays Capital Global Aggregate Bond TR Index (USD)
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