In recent years, with the rapid economic expansion, the rapid growth of stocks has been hot. However, as we enter 2019 and the market predicts that the economy will enter a period of slowdown in the future, should investors continue to take the "high-growth stock bus" or switch to the "high-interest stock bus"? Zhitong Financial APP will study and analyze the characteristics of the two below.

Tens of thousands of investment theories, suitable for their own first. In the long run, stocks with higher returns on investment and dividends are a better choice for retail investors, especially in the current environment.

The reasons are as follows:

1. Dividend-paying stocks have always performed well

Perhaps the biggest argument for investing in high dividend-paying stocks is that dividend-paying stocks have historically performed well. Over the past decade, for example, the top dividend payers in the S & P 500 index have far outperformed the index as a whole.

This result also makes sense in theory. From 1930 to 2015, dividends alone accounted for 43% of the total earnings of the s & p 500, according to a study. As a result, a stock that does not pay dividends needs to make up for the difference through substantial growth. Although it is possible to achieve high stock growth for some time, the period of recession and low growth is coming, which will become extremely difficult. In fact, another study shows that almost every 1/5 of dividend-paying stocks (ranked by yield) have outperformed non-dividend-paying stocks since 1928. If you invest in all the dividend-paying stocks in the S & P 500 in January 1972, the return is three times that of investing in non-dividend stocks.

two。 Dividend is more suitable for the environment of low interest rate and low growth.

It is a good time to buy high-yield dividend stocks offline, because in an environment of low interest rates and low growth, dividend-paying stocks perform better than growing stocks for the following reasons: 1) the valuations of dividend-paying stocks are usually very low, which means fewer optimistic expectations, so the stock price will fall less in the event of a slowdown in economic growth in the future. 2) due to recent market concerns about rapidly rising interest rates, dividend-paying stocks are valued more attractively than growth stocks (higher interest rates tend to be bad for high-yielding real asset stocks, which rely more on leverage than less capital, fast-growing stocks); 3) stocks with high dividends tend to prop up their share prices because the intrinsic value of stocks as cash flow assets is more obvious.

As the market predicts that GDP growth will slow this year and trigger a potential recession, which will then affect the television and Internet industries next year, the Fed has said it will not raise interest rates and is likely to maintain the same decision in the coming quarters. As a result, interest rates are likely to remain unchanged for the foreseeable future if they are not cut. This is like adding fuel to the fire for high-yielding, highly leveraged stocks. These stocks have been hit hard because the market is concerned about interest rates. In addition, a slowdown in the outlook for economic growth could dampen optimistic valuations of high-growth stocks.

3. Paying dividends means that this is a healthy and beneficial enterprise for investors.

The uninterrupted payment of high dividends is perhaps one of the strongest evidence that companies can demonstrate their operational vitality and return on basic benefits. This is because paying large amounts of cash over a period of time, especially if the amount continues to grow, requires the underlying business to be strong enough to generate considerable revenue to pay dividends and achieve truly free cash flow.

Many companies can (and do) tamper with financial statements to satisfy investors' hunger, claiming to make huge profits or even expand free cash flow, but investors can only see the moon in the mirror. It is particularly common in such companies where the "adjusted" results differ significantly from the figures calculated under GAAP.

However, if investors see a steady stream of dividends flowing into their pockets year after year, or even increasing year by year, they must realize that this is a real cash surplus, profits generated from the company's business. rather than being used as funds to maintain its operation or competition. A sizeable dividend payout also shows that management is concerned about how to give back to shareholders and treat them as true owners of the business. These shareholders not only have the right to share their own profits, but also have the right to directly participate in a considerable part of decision-making.

4. Dividends enable management to do their job.

When a company spends a large portion of its earnings on dividends, it greatly reduces the capital it has to reinvest in the business. The result leads to two positive results: 1) urge management to choose investment projects that are beneficial to enterprise growth more carefully, so as to prevent enterprises from overestimating their own capabilities and financial resources, and make hasty cross-field acquisitions, often ending miserably. 2) if management does want to invest and / or acquire significant new projects, they must go to the market (debt and / or stock market) to obtain additional capital and accept the price offered by the market, thus adding another layer of responsibility to their record of behavior and capital allocation.

5. Dividends give investors more flexibility

Investors also create stable income streams through dividend-paying stocks, increasing the flexibility of funds that can be reallocated when new investment opportunities arise. Although investors can choose to sell shares to raise money and reinvest elsewhere, the advantage of dividend income over stock sales is that dividends are usually taxed at the long-term capital gains rate (and even a corresponding tax deferred, such as MLPs), while selling stocks held for less than a year will result in higher taxes and fees on short-term capital gains.

In addition, selling shares at high prices is subject to changes in market conditions-which is often out of touch with the intrinsic value of the business behind the stocks-and the value of the dollar is not affected by the market.

6. Dividends are easier to value

Since growth stocks usually have higher valuation multiples (because of their higher expected growth rates), it is essentially difficult to make a reasonable valuation of them. This is because the rate of change in their earnings is usually fickle, so it is very difficult to accurately forecast growth rates even over the next 3-5 years-especially for ordinary retail investors-taking into account that such growth rates are often significantly affected by macroeconomic forces and complex industries and / or technological forces.

On the other hand, many dividend-paying stocks, especially high-yielding real asset stocks, have simpler and more stable business models, grow more slowly and steadily, and usually do not change dramatically with changes in economic and industry trends. As a result, they are easier to value and have a much smaller margin of error, helping to prevent many retail investors from getting caught up in hype and soaring share prices, or putting large amounts of money into a stock only to see it collapse again. Instead, investors who support dividend-paying stocks only need to focus on the stocks they choose to buy in order to gain passive income, regardless of short-term prices.

7. Dividends will help you sleep.

Last but not least, dividend-paying stocks allow investors to sleep better at night. This is because the steady flow of dividends in all market cycles helps to reassure investors rather than being moved by falling share prices. In fact, it can even give people a glimmer of hope in a market downturn-the opportunity to use dividends to reduce the cost base.

In addition, as mentioned earlier, business models with lower valuation multiples and more stable cash flow, including high-yield dividend stocks, can also mitigate catastrophic price falls and convince investors that the company will weather the downturn.

Investment hint

Considering these factors that are conducive to income-oriented investment, how should investors proceed to build their own portfolio?

One option is to simply invest in a wider range of high-yield index funds, such as Vanguard Real Estate ETF (VNQ.US), ProShares S & P 500 dividend aristocratic ETF (NOBL.US), or even preferred stock index ETF, such as iShares S & P international preferred stock ETF (IPFF.US). However, this means buying every real estate investment trust (REIT) in the corresponding index regardless of current price, quality, prospects or management.

Novice players may find a wide range of diversified fund investments very useful, using a smarter method to analyze the qualitative and quantitative aspects of each REIT to pick out the most speculative products, which will provide you with stable long-term high returns.