Rising valuations pose equity-income challenge

Guardian's Michele Robitaille trims energy holdings.

Sonita Horvitch 14 May, 2014 | 6:00PM

Michele Robitaille, managing director and equity-income specialist at Guardian Capital LP, says that the environment for dividend-paying securities should continue to be positive this year, as interest rates are likely to remain benign.

"Ultimately rates will rise, but the long-term case for dividend payers remains intact," she says. "Dividends have been a larger and more reliable contributor to stock returns than price appreciation over the past 40 years." Also, she says, those businesses that are growing their dividends "will continue to be well placed in a rising interest rate environment."

The shorter-term challenge in the equity-income space, Robitaille says, is that valuations across the board have risen sharply over the past couple of quarters. This covers "everything from real estate investment trusts (REITs) to banks to utilities." Energy producers and more particularly energy-infrastructure companies have also seen valuations increase substantially, she says. "Energy ran hard in the first quarter of 2014 and energy-infrastructure stocks ran even harder."

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Sonita Horvitch

Sonita Horvitch  

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