High dividend debut

01Oct07

At Abnormal Returns we don’t point to research from the buy-side all that often. However, we recently came across a research piece on the value of dividend-focused investing that is worth noting.

The launch of a new mutual fund, is not often the occasion for an academic-focused research article. The Tweedy, Browne Worldwide High Dividend Yield Value Fund (TBHDX) is the exception to this rule.

The well-regarded value investing shop Tweedy, Browne recently published a paper (PDF) entitled, “The High Dividend Yield Return Advantage: An Examination of Empirical Data Associating Investment in High Dividend Yield Securities with Attractive Returns Over Long Measurement Periods.”

The paper is a “sampling” of the academic research on the topic of high dividend investing and is accessible to motivated investors. Their conclusion in part reads:

It seems clear, at least from the studies contained herein, that stocks with high dividend yields have enjoyed interesting return advantages over their lower yield counterparts. As to why this is the case, we can only surmise.

We were originally pointed to this paper via a profile of this new mutual fund by David Snowball at the FundAlarm.com Annex.  In conjuction with this profile he takes a look at the shortcomings of the current dividend-focused ETFs.  Snowball’s monthly new-fund profiles are worth a read even if you have little or no interest in investing in the underlying fund.

*No position in Affiliated Managers Group (AMG).

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