Dividend-centered fund on a run, up 5.5% this year
Payden Value Leaders rejiggered, now zeroing in on large caps with hefty payouts; it's working, too
With market jitters up — and yields on traditional income investments down — stock dividends are looking increasingly attractive, according to Jay Wong, co-manager of the Payden Value Leaders Fund Ticker:(PYVLX).
“Our objective is to spin off dividend yields that are competitive with bond funds,” Mr. Wong said.
He manages the fund along with Frank Lee at Payden & Rygel Investment Management, a $61 billion asset management firm.
The 10-year-old fund was restructured this year from a large-cap-value-focused strategy to a strategy that now aims to generate dividend yields above that of the S&P 500.
“We wanted a vehicle that could provide the kind of cash flows that our investors wanted,” Mr. Wong said.
To that end, the fund invests across multiple equity income categories, including common stock, preferred stock, real estate investment trusts and master limited partnerships.
About two-thirds of the $63 million portfolio is currently invested in common stock, where the managers target companies with market capitalizations that are above $2 billion and with dividend yields that are double that paid out by the S&P 500.
One example from the portfolio of more than 60 positions is Southern Co. Ticker:(SO), the largest utility in the Southeastern United States. The company has a $35 billion market cap and a 5% dividend yield.
While Mr. Wong admits dividend yields are currently below historical averages of about 40% of corporate profits, the current payout level of about 30% is up from 2008 when dividend payouts dipped to below 25% of corporate profits.
RELATED ITEM The top 10 dividend-paying ETFs »
The trend is moving in the right direction.
“It’s the right environment for a strategy like this,” he said, “because it’s a low-volatility strategy and the fundamentals are supporting dividend-paying stocks.”
This year through yesterday, the fund was up 5.5%, which compares with a 3.8% decline by the S&P 500. The portfolio is also generating returns with only about 60% of the volatility of the index.
The fund ranks in the top percentile of the Morningstar Inc. large-value category, which produced an average decline of 6.7% since the start of the year.
Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.
Learn more about reprints and licensing for this article.
