Dividends signal growth potential in emerging markets, Forward Management argues in a new white paper, “Global Equities: Can Dividends Signal Growth?”
The white paper shows how dividend-paying companies have outperformed companies that do not pay dividends in both developed and emerging markets nations. In the decade ended Dec. 31, 2010, funds paying dividends delivered an asset-weighted average return of 43.6%, compared to growth funds’ 28.1% return.
“Our findings debunk the common stereotype of dividend-paying companies as plodding and unexciting,” said David Ruff, head of Forward’s emerging markets investment team. “On the contrary, history shows that companies that paid a regular cash dividend are more likely than others to be growing, dynamic enterprises.”
Forward says there are a number of reasons why dividend-paying companies do well, beginning with investors’ appreciation for their income-generation even during market downturns and volatility. Managers of dividend-paying companies also tend to be better stewards of capital, Forward says. And companies that pay dividends are more forthcoming in their accounting standards, the investment management firm says.
In conjunction with this report, Forward has just launched the Forward Select EM Dividend Fund.