February 2023

Dividends Continue to Provide Potential Bright Spot For Market

Many investors were happy to see the page turn on 2022, and they are looking with some concern at 2023. That makes this a good time to look at where we stand – and where we might be headed.

2022 was a difficult year for investors. While the market recovered somewhat from its first-half fall of more than 25% in the Standard & Poor’s 500 Index, it was still down on the year. And many of the issues that caused the market unrest – including inflation and political uncertainty both at home and abroad – remain.

But there are bright spots. First, the measures that the government and others are taking to deal with inflation and employment issues are working. Inflation is dropping slowly, and hiring is picking up. We don’t know whether those positive things will continue, of course. We also don’t know whether existing or yet-unknown economic or geopolitical events will roil things up again.

In times like these, it can be illuminating to look at what companies are doing. And one of the biggest trends of 2022 was dividends. S&P 500 companies spent a record amount on dividends to shareholders last year, as many resumed or increased dividends that had been halted or cut during the pandemic. In 2022, S&P companies’ dividend allocations were an estimated $561 billion, which is the highest ever. And many experts expect this to continue in 2023.

At Peachtree Investment Partners, investing in stocks that pay dividends is a cornerstone of our approach. That’s because over time, reinvested dividends can have a major impact on your portfolio growth. And dividend income means the return on your investments does not depend fully on an increase – or a decrease -- in stock price.

We also believe that a consistent record of paying dividends can be an indication of a strong, well-run company with a clear and well-thought-out vision. We focus our investment decisions on the stocks of companies that have tested strategies and a track record of success. We invest mainly in large American companies that have strong leaders with the experience and foresight to recognize and adapt to whatever happens. We also look for companies with a good return on investment and a long history of consistency in revenue and earnings growth.

And finally, we believe in taking a long-term approach to investing. Certainly there are people who have made a fortune by getting into an investment at precisely the right time – and then getting out before its too late. But it is much more common to get into an investment too late and then hold on too long. We believe that, for most people, slow and steady wins the race. And it also can make it easier to sleep at night.

As we get further into 2023, we will continue to watch how events at home and abroad affect the economy overall and the markets. If you have any questions or concerns about your portfolio or our investment approach, please don’t hesitate to reach out. We are here to help.

Garry K. Schaefer
February 21, 2023

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