Low price volatility has been a general theme in the market, as stocks have been gaining but trading within thin trading ranges. Many of the market’s low volatility stocks are often mature businesses paying steady dividends, which helps to keep their prices more stable.
In a recent presentation from Royce Funds, Jay Kaplan discussed the use of low volatility stocks in the company’s portfolios.
In the current market environment, dividend paying stocks have been highly sought after, helping the equity market to gain. Kaplan’s comments provide even greater support for investing in dividend stocks. As a small-cap fund manager, the company's funds are highly focused around Russell 2000 investments. Currently, the Russell 2000 Index has a dividend yield of 1.51%, nearly matching the yield of the 10 year U.S. Treasury in dividends alone.
Kaplan’s case provides even greater incentive for investing in dividend stocks in the small-cap universe, with dividend stocks outperforming non-dividend paying stocks by approximately 5% on an annualized basis.
For investors seeking dividend yield in today’s current market, Royce Funds provides a variety of options. As rates begin to slightly rise, increased due diligence and investment in actively managed dividend funds could help investors find even greater return.
Jay Kaplan’s Royce Dividend Value Fund has been a market leader. Year to date the fund has a return of 9.06%. Top stocks in the Fund have returned over 40% year to date. The Fund is currently led by Worthington Industries (WOR, Financial), Franco-Nevada Corporation (FNV, Financial) and Ritchie Brothers Auctioneers (RBA, Financial).
Disclosure: I do not own any stocks included in this article.
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