Focus on fundamentals Focus on fundamentals https://stage-fii.federatedinvestors.com/static/images/fhi/fed-hermes-logo-amp.png https://stage-fii.federatedinvestors.com/daf\images\insights\video\bakhshian-video-1-2020-small.jpg January 21 2020 January 3 2020

Focus on fundamentals

Senior Portfolio Manager Linda Bakhshian explains why fundamentals are key in picking dividend-paying securities.
Published January 3 2020
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Video Transcript
00:05
I'm Linda Bakhshian, Senior Portfolio Manager at Federated Investors.
00:09
How should investors be thinking about income investing in 2020? Well, we're all getting older and the need for income is not abating. However, investors that need income should really balance that need with fundamentals. In 2019, we saw some of the best performing companies in the market are in technology and in consumer discretionaries, for example, and they were dividend-paying securities. And vice versely, in 2019, some of the worst performing securities such as in retail were paying very high dividends. So fundamentals are very important in picking the best dividend-paying securities.
00:47
Our strategy for 2020 is really no different for 2019. We look for companies that have strong fundamentals, balance sheets and cash flows. Companies that are raising their dividends which indicates strong ability to pay that dividend in the future and strong profitability. We're also looking at companies that are multinational that are paying a dividend. If you believe in our view at Federated that 2020 is going to be a good fundamental year and strong year for the markets, then multinationals should be doing well as well on a fundamental level. And also getting an income from them.
01:24
Which sectors look interesting from an income perspective? As with stocks, we like sectors that are exhibiting positive fundamental change. And technology is one area that we continue to like. The sector exhibits strong structural growth rate driven by artificial intelligence, augmented reality, computing, data and gaming and we like companies that are within those sectors and within those drivers. We also like the financial sector. Although net interest margins are under pressure, we like the consumer side of financials.
01:59
We like to bet on the US consumer to remain strong in 2020 and probably beyond and hence the consumer-driven sector of financials should continue to do well. In addition, for investors that do want to have strong longer-term performance in their portfolio, maybe looking at healthcare. As I said before, we're all getting older and hence we need more healthcare and healthcare is going to have structural growth rate. However, in 2020 specifically, it will probably a football that gets thrown around within a political realm.
02:35
Views are as of December 12, 2019 and are subject to change based on market conditions and other factors. These views should not be construed as recommendations for any specific security or sector. There is no guarantee that dividend-paying stocks will continue to pay dividends. In addition, dividend-paying stocks may not experience the same capital appreciation potential as non-dividend-paying stocks. Bond prices are sensitive to changes in interest rates and a rise in interest rates can cause a decline in their prices. Federated Equity Management Company of Pennsylvania 19-10156 (12/19)
Tags Equity . Markets/Economy .
DISCLOSURES

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

There are no guarantees that dividend-paying stocks will continue to pay dividends. In addition, dividend-paying stocks may not experience the same capital appreciation potential as non-dividend-paying stocks.

Bond prices are sensitive to changes in interest rates, and a rise in interest rates can cause a decline in their prices.

Federated Equity Management Company of Pennsylvania