Let’s be clear. We are in a dividend bubble. People are buying over-valued companies only because of a high dividend.
With interest rates so low, investors are searching for a higher yield. Just like the tech bubble, they think valuations don’t matter any more.
It’s a dividend mania! The papers have article after article about dividend investing. Investment-focused advisors are recommending dividend funds. Calls on the phone-in shows on BNN are all about dividend stocks. There are shows only about dividend investing.
Exactly like the tech bubble in the 1990s.
Valuations are high (20-30 P/E), growth is low (often negative).
The tech bubble had high valuation with high growth, but no profits. The dividend bubble is high valuation with profits, but little or no growth – often declining businesses.
Of course, most stocks pay a dividend, but top fund managers invest properly based on quality and value. They don’t over-pay for a dividend.
The top fund managers are avoiding high dividend stocks and low volatility stocks today. http://www.forbes.com/sites/jareddillian/2016/10/27/the-bubble-you-never-even-thought-was-a-bubble-dividends/#63d61c0d1d1e