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Eaton Vance's Allison Sees Dividend Stocks as Expensive (Audio) · Bloomberg Intelligence

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  Speaker 1: Broadcasting live to New York, Bloomberg Even, to Washington, d C,
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  Speaker 1: globe the Bloomberg Radio plus Zappen Bloomberg dot Com. This
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  Speaker 1: is taking Stock Kathleen Hayes along with Pam Fox, broadcasting
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  Speaker 1: live from Smith and Lensky Restaurant here in Boston. In
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  Speaker 1: this half hour, two of Boston's finest investment minds are
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  Speaker 1: joining us. We're kicking off with Mike Allison from Eaton
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  Speaker 1: Vance Management. We're gonna learn about how to grow some
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  Speaker 1: income in a world where bond deals are lower negative
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  Speaker 1: and even dividend funds are looking a little bit harder
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  Speaker 1: to pick and pick well him. Yes. Indeed, for example,
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  Speaker 1: today Rio Tinto posting it's the worst of profits since
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  Speaker 1: the two thousand four and also cut the dividend nearly
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  Speaker 1: sixty percent. Let's go to Charlie Pellett in the Bloomberg
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  Speaker 1: newsroom for Bloomberg Business and I thank you, Pim, thank you, Kathleen.
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  Speaker 1: Rio shares up four tens or one percent. Pim and
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  Speaker 1: Kathleen will be talking about the one d forty three
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  Speaker 1: year old mining giant, has cut costs, reined in spending,
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  Speaker 1: and sold underperforming assets in a bid to whether the
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  Speaker 1: commodities crisis sparked by China's slowing growth and a glut
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  Speaker 1: of raw materials. Rio is led by CEO Jean Sebastian Jack,
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  Speaker 1: and he spoke this morning with Bloomberg Television. Astragi is
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  Speaker 1: very simple. It's about two elements. One is about the
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  Speaker 1: quality of the portfolio, what we call t you know, large,
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  Speaker 1: low cost. We have lots of optional eighties in Samso proof.
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  Speaker 1: And it's about perference. We are very clear we want
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  Speaker 1: to give compelling returns. Four shoulders in the shout, medium
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  Speaker 1: and long term. Crude oil trading higher up four point
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  Speaker 1: two percent, up a dollar sixty four West Texas Intermediate
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  Speaker 1: now at forty one fifteen barrel Brent up three point
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  Speaker 1: four percent. ADP says companies added workers to American payrolls
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  Speaker 1: at a steady pace from the prior month, showing the
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  Speaker 1: uper market was holding up in spite of broader growth
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  Speaker 1: numbers that indicate a slowing in the economy. ADP said
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  Speaker 1: private payrolls climbed by one hundred seventy nine thousand. Last month,
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  Speaker 1: we will have the job's report eight thirty am. Wall
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  Speaker 1: Street Time complete coverage heading into coming out of that
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  Speaker 1: job's number. SMP up three to sixty a game there
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  Speaker 1: of two tenths of one percent. To Dow up eighteen,
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  Speaker 1: a gain of one tenth of one percent, NAS Stack
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  Speaker 1: up seventeen, a gain of three tenths of one percent,
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  Speaker 1: Gold down eight dollars anounced the thirteen sixty, a drop
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  Speaker 1: there of six tenths of one percent. It is three
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  Speaker 1: thirty two on Wall Street. Now, let's take a look
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  Speaker 1: at some of the other stories making news. Thank you
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  Speaker 1: Charlie from the Bloomberg News Room. I'm Jill Schneider. This
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  Speaker 1: the world. We know that certainly is truer in the
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  Speaker 1: United States as well. Young had been on the police
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  Speaker 1: force for twelve years. Florida Senator and former GOP presidential
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  Speaker 1: candidate Marco Rubio is calling on Congress and President Obama
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  Speaker 1: to do more to fight ZEKA. I believe it won't
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  Speaker 1: be long before other jurisdictions, other states, and other communities
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  Speaker 1: in the state and in this country will face the
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  Speaker 1: same situation, and so I hope that this is a
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  Speaker 1: wakeup call to my colleagues, and I reiterate my call
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  Speaker 1: for Congress to act quickly. Outgoing NYPD Commissioner Bill Brandon
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  Speaker 1: and his replacement, James O'Neill, joined Mayor Bill de Blasio
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  Speaker 1: at the annual National Night Out event Tuesday to announce
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  Speaker 1: areas they serve. Global news twenty four hours a day,
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  Speaker 1: powered by more than journalists and analysts in more than
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  Speaker 1: one twenty countries. I'm Jill Schneider, and this is Bloomberg, Charlie,
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  Speaker 1: and we thank you and again recapping the now the
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  Speaker 1: SMP nestack called Advancing twenty six minutes to go ahead
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  Speaker 1: of the clothes. On a Wednesday, SMP five hundred index
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  Speaker 1: up three, a gain of two tenths of one percent.
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  Speaker 1: I'm Charlie Pellett and that's a Bloomberg Business flash stock
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  Speaker 1: with Kathleen Mays and Pim Fox on Bloomberg Ringox very
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  Speaker 1: special show today, broadcast live in Boston from Smith and
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  Speaker 1: Lydsky Restaurant. Mike Alliston joins us now. He's vice president
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  Speaker 1: Equity portfolio manager Eaton Evans Management. In fact, he is
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  Speaker 1: the manager on the eating Vans Global Income Dividend Builder Fund.
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  Speaker 1: He's here to tell us how we can pick some
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  Speaker 1: good dividend funds, some good dividend paying stocks. At a
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  Speaker 1: time when they've gotten more expensive relative to the broader market,
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  Speaker 1: but still looking pretty good when you look at trying
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  Speaker 1: to build income through any kind of bond these days. Mike,
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  Speaker 1: welcome back to the show. Thanks thanks for having me.
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  Speaker 1: So glad you could join us on this beautiful day.
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  Speaker 1: It's a beautiful, a beautiful day here in Boston. I
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  Speaker 1: think the last time we were here, you guys were
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  Speaker 1: up in um Our offices on the roof deck and
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  Speaker 1: broadcast from from there at International Place. What was a
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  Speaker 1: beautiful day then too. So you're you're good luck, Mike Allison.
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  Speaker 1: But so what about how you're you're viewing the markets?
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  Speaker 1: I mean, is it tougher to be an income builder
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  Speaker 1: through dividends these days? Well, I think um number one
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  Speaker 1: in terms of just sort of the market backdrop of
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  Speaker 1: We've been fairly surprised at how uh steadily the wall
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  Speaker 1: of worry has been climbed. You know, there's a lot
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  Speaker 1: to worry about Chinese situation, Brexit, election uncertainty, economic concertainty,
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  Speaker 1: fed policy, all those sorts of things, and yet the
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  Speaker 1: market has just continued to, you know, to march upward
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  Speaker 1: UM in relatively sanguine fashion. You know, the VIX is low,
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  Speaker 1: a lot of the other indicators are low. So what's
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  Speaker 1: going on in terms of the behavior of the market
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  Speaker 1: is it doesn't really match some of the angst that's
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  Speaker 1: out there, and not only any across the economy, but
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  Speaker 1: even amongst professional money managers that have lots of cash, uh,
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  Speaker 1: still to worry about how to put to work, and
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  Speaker 1: so that is a is a challenge. Um. The you know,
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  Speaker 1: sort of focusing on on dividends, we we think of
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  Speaker 1: dividends is and truly the portion of the return, you know,
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  Speaker 1: And and so to the extent that you're invested in
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  Speaker 1: quality companies that have strong franchises and strong balance sheets
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  Speaker 1: and can sustain dividends, um, even if the yield is
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  Speaker 1: lower than some of the ones where there may be
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  Speaker 1: dividend risks you mentioned earlier, Kim Um. You know, I
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  Speaker 1: think being able to grow dividends and sustain them is
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  Speaker 1: really what makes for a good stock. So it's a
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  Speaker 1: combination of income as well as capful appreciation with makeup
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  Speaker 1: total return. All right, Just to put it into some
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  Speaker 1: context here, taking a look at the dividend yield of
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  Speaker 1: the S and P five right now, two point one
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  Speaker 1: per cent the ten year trades at one point five
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  Speaker 1: three per cent. You factor in inflation, let's just add
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  Speaker 1: in food and energy just for kicks, let's right, and
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  Speaker 1: and you know two percent, you're you're basically a negative
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  Speaker 1: rate of return. Yeah, in in in real terms term,
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  Speaker 1: that's some would some would argue that, uh, and that's
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  Speaker 1: that's kind of I think feeds the the perception that
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  Speaker 1: the particularly in the US stocks are really expensive, but
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  Speaker 1: yet relative to other asset classes. UM. This is on
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  Speaker 1: this this this kind of acrodym that we talk about, Tina,
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  Speaker 1: there is no alternative. Equities are the only place to be.
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  Speaker 1: And so I think in the search for yield and
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  Speaker 1: income replacement versus other asset classes, I think that's why
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  Speaker 1: you've seen several of the highest yielding sectors in the
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  Speaker 1: um UH in the market become very expensive, you know,
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  Speaker 1: utilities and consumer staples for example. What what war is
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  Speaker 1: going with this was that the idea that people should
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  Speaker 1: not necessarily just look at the dividend yield, because just
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  Speaker 1: as I was mentioning Rio Tempto earlier, you going to
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  Speaker 1: look for a big, fat yield and you think, g
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  Speaker 1: how can they pay this yield? This can this is
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  Speaker 1: too good to be true. Chances are probably is too
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  Speaker 1: good to be true. Well, I think that that goes
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  Speaker 1: to you know mentioned before, cash flow generation, fundamental UH,
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  Speaker 1: franchise strength, balance sheet strength UM. One of the things
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  Speaker 1: that that we've done, because we focus a lot on
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  Speaker 1: on equity income investing diviendated income UH is we took
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  Speaker 1: a look at the SMP five hundred and ranked the
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  Speaker 1: SMP five hundred by UH by dividend yield and put
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  Speaker 1: those into quintiles, and you'd be surprised. You may be
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  Speaker 1: surprised to know that it's actually the second quintile of
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  Speaker 1: dividen yield, not the highest yielders, but the second quintile
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  Speaker 1: that actually outperforms all the other quintiles. And so that's
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  Speaker 1: sort of a reflection of maybe attractively valued companies with
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  Speaker 1: with modest but strong UH dividends and strong franchises and
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  Speaker 1: they actually outperform with lower with lower volatility, so higher
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  Speaker 1: risk adjusted returns in that strata of the market versus
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  Speaker 1: going and chasing the highest yields because they may not
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  Speaker 1: be secure. It sounds very attractive. I want to point
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  Speaker 1: out something that are Bloomberg Intelligence team that looks at dividends.
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  Speaker 1: Their global latest global dashboard talks about nineteen nineties stars
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  Speaker 1: like IBM, S and Cisco leading a certain the infect
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  Speaker 1: is the first trust NASDAC Technology Dividend Index fund to
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  Speaker 1: a record high. How do you feel about those kinds
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  Speaker 1: of companies when it comes to dividends? Are that are that?
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  Speaker 1: Are they the first core quintile or the highest one
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  Speaker 1: used to avoid? Are they somewhere in the middle and
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  Speaker 1: looking a little bit more attractive? I would say I
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  Speaker 1: would say that some of the more mature technology companies
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  Speaker 1: are a really good place to be because they do
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  Speaker 1: have very strong cash flow characteristics and good strong balance
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  Speaker 1: sheets and relatively strong franchises versus other parts of the
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  Speaker 1: mortorcixical parts of the economy. And so that is that
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  Speaker 1: is an area where we have a lot of interest
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  Speaker 1: in terms of being able to uh to focus on
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  Speaker 1: on that. Allen, want to thank you very much for
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  Speaker 1: coming by and spending time with this. Michael Allison. He
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  Speaker 1: is the vice president and Equity portfolio manager for Eaton
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  Speaker 1: Events Management, based here in Boston Course home to Bloomberg
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  Speaker 1: twelve hundred. Thanks for thanks very much for having me.
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  Speaker 1: Appreciate my pleasure. How We are broadcasting from Smith and
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