WEBVTT - Eaton Vance's Allison Sees Dividend Stocks as Expensive (Audio)

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<v Speaker 1>Broadcasting live to New York, Bloomberg Even, to Washington, d C,

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<v Speaker 1>Bloomber to Boston, Bloomberg Well unders to San Francisco Bloomberg

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<v Speaker 1>nine to the country Channel one nine, and around the

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<v Speaker 1>globe the Bloomberg Radio plus Zappen Bloomberg dot Com. This

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<v Speaker 1>is taking Stock Kathleen Hayes along with Pam Fox, broadcasting

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<v Speaker 1>live from Smith and Lensky Restaurant here in Boston. In

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<v Speaker 1>this half hour, two of Boston's finest investment minds are

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<v Speaker 1>joining us. We're kicking off with Mike Allison from Eaton

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<v Speaker 1>Vance Management. We're gonna learn about how to grow some

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<v Speaker 1>income in a world where bond deals are lower negative

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<v Speaker 1>and even dividend funds are looking a little bit harder

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<v Speaker 1>to pick and pick well him. Yes. Indeed, for example,

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<v Speaker 1>today Rio Tinto posting it's the worst of profits since

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<v Speaker 1>the two thousand four and also cut the dividend nearly

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<v Speaker 1>sixty percent. Let's go to Charlie Pellett in the Bloomberg

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<v Speaker 1>newsroom for Bloomberg Business and I thank you, Pim, thank you, Kathleen.

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<v Speaker 1>Rio shares up four tens or one percent. Pim and

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<v Speaker 1>Kathleen will be talking about the one d forty three

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<v Speaker 1>year old mining giant, has cut costs, reined in spending,

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<v Speaker 1>and sold underperforming assets in a bid to whether the

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<v Speaker 1>commodities crisis sparked by China's slowing growth and a glut

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<v Speaker 1>of raw materials. Rio is led by CEO Jean Sebastian Jack,

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<v Speaker 1>and he spoke this morning with Bloomberg Television. Astragi is

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<v Speaker 1>very simple. It's about two elements. One is about the

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<v Speaker 1>quality of the portfolio, what we call t you know, large,

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<v Speaker 1>low cost. We have lots of optional eighties in Samso proof.

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<v Speaker 1>And it's about perference. We are very clear we want

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<v Speaker 1>to give compelling returns. Four shoulders in the shout, medium

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<v Speaker 1>and long term. Crude oil trading higher up four point

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<v Speaker 1>two percent, up a dollar sixty four West Texas Intermediate

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<v Speaker 1>now at forty one fifteen barrel Brent up three point

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<v Speaker 1>four percent. ADP says companies added workers to American payrolls

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<v Speaker 1>at a steady pace from the prior month, showing the

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<v Speaker 1>uper market was holding up in spite of broader growth

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<v Speaker 1>numbers that indicate a slowing in the economy. ADP said

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<v Speaker 1>private payrolls climbed by one hundred seventy nine thousand. Last month,

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<v Speaker 1>we will have the job's report eight thirty am. Wall

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<v Speaker 1>Street Time complete coverage heading into coming out of that

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<v Speaker 1>job's number. SMP up three to sixty a game there

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<v Speaker 1>of two tenths of one percent. To Dow up eighteen,

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<v Speaker 1>a gain of one tenth of one percent, NAS Stack

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<v Speaker 1>up seventeen, a gain of three tenths of one percent,

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<v Speaker 1>Gold down eight dollars anounced the thirteen sixty, a drop

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<v Speaker 1>there of six tenths of one percent. It is three

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<v Speaker 1>thirty two on Wall Street. Now, let's take a look

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<v Speaker 1>at some of the other stories making news. Thank you

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<v Speaker 1>Charlie from the Bloomberg News Room. I'm Jill Schneider. This

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<v Speaker 1>news update is brought to you by Blue Jeans Enterprise

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<v Speaker 1>Video Cloud. See Faces, Emotions, Energy, see two people your

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<v Speaker 1>trial at blue Jeans dot com and click the radio Mike.

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<v Speaker 1>Blue Jeans Work Smarter, Connect Better. The Obama administration is

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<v Speaker 1>reacting to the arrest of a veteran police officer in Washington,

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<v Speaker 1>d C. Thirty six year old Nicholas Young of Fairfax

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<v Speaker 1>was arrested at DC police headquarters this morning, he's accused

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<v Speaker 1>of trying to send codes for mobile messaging cards to

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<v Speaker 1>foreign fighters. White House Press Secretary Josh Ernest his officials

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<v Speaker 1>are mindful of the risk posed by homegrown extremists. We

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<v Speaker 1>know that part of the strategy that is used by

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<v Speaker 1>extremist groups around the world, including ISIS, is to use

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<v Speaker 1>social media to try to recruit followers and countries around

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<v Speaker 1>the world. We know that certainly is truer in the

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<v Speaker 1>United States as well. Young had been on the police

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<v Speaker 1>force for twelve years. Florida Senator and former GOP presidential

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<v Speaker 1>candidate Marco Rubio is calling on Congress and President Obama

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<v Speaker 1>to do more to fight ZEKA. I believe it won't

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<v Speaker 1>be long before other jurisdictions, other states, and other communities

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<v Speaker 1>in the state and in this country will face the

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<v Speaker 1>same situation, and so I hope that this is a

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<v Speaker 1>wakeup call to my colleagues, and I reiterate my call

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<v Speaker 1>for Congress to act quickly. Outgoing NYPD Commissioner Bill Brandon

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<v Speaker 1>and his replacement, James O'Neill, joined Mayor Bill de Blasio

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<v Speaker 1>at the annual National Night Out event Tuesday to announce

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<v Speaker 1>the expansion of the Neighborhood Coordination Officers Program. It's designed

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<v Speaker 1>to put cops in specific communities to identify and respond

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<v Speaker 1>to problems and make officers a bigger part of the

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<v Speaker 1>areas they serve. Global news twenty four hours a day,

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<v Speaker 1>powered by more than journalists and analysts in more than

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<v Speaker 1>one twenty countries. I'm Jill Schneider, and this is Bloomberg, Charlie,

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<v Speaker 1>and we thank you and again recapping the now the

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<v Speaker 1>SMP nestack called Advancing twenty six minutes to go ahead

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<v Speaker 1>of the clothes. On a Wednesday, SMP five hundred index

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<v Speaker 1>up three, a gain of two tenths of one percent.

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<v Speaker 1>I'm Charlie Pellett and that's a Bloomberg Business flash stock

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<v Speaker 1>with Kathleen Mays and Pim Fox on Bloomberg Ringox very

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<v Speaker 1>special show today, broadcast live in Boston from Smith and

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<v Speaker 1>Lydsky Restaurant. Mike Alliston joins us now. He's vice president

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<v Speaker 1>Equity portfolio manager Eaton Evans Management. In fact, he is

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<v Speaker 1>the manager on the eating Vans Global Income Dividend Builder Fund.

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<v Speaker 1>He's here to tell us how we can pick some

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<v Speaker 1>good dividend funds, some good dividend paying stocks. At a

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<v Speaker 1>time when they've gotten more expensive relative to the broader market,

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<v Speaker 1>but still looking pretty good when you look at trying

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<v Speaker 1>to build income through any kind of bond these days. Mike,

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<v Speaker 1>welcome back to the show. Thanks thanks for having me.

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<v Speaker 1>So glad you could join us on this beautiful day.

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<v Speaker 1>It's a beautiful, a beautiful day here in Boston. I

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<v Speaker 1>think the last time we were here, you guys were

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<v Speaker 1>up in um Our offices on the roof deck and

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<v Speaker 1>broadcast from from there at International Place. What was a

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<v Speaker 1>beautiful day then too. So you're you're good luck, Mike Allison.

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<v Speaker 1>But so what about how you're you're viewing the markets?

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<v Speaker 1>I mean, is it tougher to be an income builder

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<v Speaker 1>through dividends these days? Well, I think um number one

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<v Speaker 1>in terms of just sort of the market backdrop of

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<v Speaker 1>We've been fairly surprised at how uh steadily the wall

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<v Speaker 1>of worry has been climbed. You know, there's a lot

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<v Speaker 1>to worry about Chinese situation, Brexit, election uncertainty, economic concertainty,

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<v Speaker 1>fed policy, all those sorts of things, and yet the

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<v Speaker 1>market has just continued to, you know, to march upward

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<v Speaker 1>UM in relatively sanguine fashion. You know, the VIX is low,

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<v Speaker 1>a lot of the other indicators are low. So what's

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<v Speaker 1>going on in terms of the behavior of the market

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<v Speaker 1>is it doesn't really match some of the angst that's

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<v Speaker 1>out there, and not only any across the economy, but

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<v Speaker 1>even amongst professional money managers that have lots of cash, uh,

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<v Speaker 1>still to worry about how to put to work, and

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<v Speaker 1>so that is a is a challenge. Um. The you know,

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<v Speaker 1>sort of focusing on on dividends, we we think of

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<v Speaker 1>dividends is and truly the portion of the return, you know,

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<v Speaker 1>And and so to the extent that you're invested in

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<v Speaker 1>quality companies that have strong franchises and strong balance sheets

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<v Speaker 1>and can sustain dividends, um, even if the yield is

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<v Speaker 1>lower than some of the ones where there may be

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<v Speaker 1>dividend risks you mentioned earlier, Kim Um. You know, I

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<v Speaker 1>think being able to grow dividends and sustain them is

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<v Speaker 1>really what makes for a good stock. So it's a

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<v Speaker 1>combination of income as well as capful appreciation with makeup

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<v Speaker 1>total return. All right, Just to put it into some

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<v Speaker 1>context here, taking a look at the dividend yield of

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<v Speaker 1>the S and P five right now, two point one

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<v Speaker 1>per cent the ten year trades at one point five

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<v Speaker 1>three per cent. You factor in inflation, let's just add

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<v Speaker 1>in food and energy just for kicks, let's right, and

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<v Speaker 1>and you know two percent, you're you're basically a negative

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<v Speaker 1>rate of return. Yeah, in in in real terms term,

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<v Speaker 1>that's some would some would argue that, uh, and that's

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<v Speaker 1>that's kind of I think feeds the the perception that

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<v Speaker 1>the particularly in the US stocks are really expensive, but

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<v Speaker 1>yet relative to other asset classes. UM. This is on

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<v Speaker 1>this this this kind of acrodym that we talk about, Tina,

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<v Speaker 1>there is no alternative. Equities are the only place to be.

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<v Speaker 1>And so I think in the search for yield and

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<v Speaker 1>income replacement versus other asset classes, I think that's why

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<v Speaker 1>you've seen several of the highest yielding sectors in the

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<v Speaker 1>um UH in the market become very expensive, you know,

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<v Speaker 1>utilities and consumer staples for example. What what war is

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<v Speaker 1>going with this was that the idea that people should

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<v Speaker 1>not necessarily just look at the dividend yield, because just

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<v Speaker 1>as I was mentioning Rio Tempto earlier, you going to

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<v Speaker 1>look for a big, fat yield and you think, g

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<v Speaker 1>how can they pay this yield? This can this is

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<v Speaker 1>too good to be true. Chances are probably is too

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<v Speaker 1>good to be true. Well, I think that that goes

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<v Speaker 1>to you know mentioned before, cash flow generation, fundamental UH,

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<v Speaker 1>franchise strength, balance sheet strength UM. One of the things

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<v Speaker 1>that that we've done, because we focus a lot on

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<v Speaker 1>on equity income investing diviendated income UH is we took

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<v Speaker 1>a look at the SMP five hundred and ranked the

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<v Speaker 1>SMP five hundred by UH by dividend yield and put

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<v Speaker 1>those into quintiles, and you'd be surprised. You may be

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<v Speaker 1>surprised to know that it's actually the second quintile of

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<v Speaker 1>dividen yield, not the highest yielders, but the second quintile

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<v Speaker 1>that actually outperforms all the other quintiles. And so that's

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<v Speaker 1>sort of a reflection of maybe attractively valued companies with

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<v Speaker 1>with modest but strong UH dividends and strong franchises and

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<v Speaker 1>they actually outperform with lower with lower volatility, so higher

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<v Speaker 1>risk adjusted returns in that strata of the market versus

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<v Speaker 1>going and chasing the highest yields because they may not

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<v Speaker 1>be secure. It sounds very attractive. I want to point

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<v Speaker 1>out something that are Bloomberg Intelligence team that looks at dividends.

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<v Speaker 1>Their global latest global dashboard talks about nineteen nineties stars

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<v Speaker 1>like IBM, S and Cisco leading a certain the infect

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<v Speaker 1>is the first trust NASDAC Technology Dividend Index fund to

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<v Speaker 1>a record high. How do you feel about those kinds

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<v Speaker 1>of companies when it comes to dividends? Are that are that?

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<v Speaker 1>Are they the first core quintile or the highest one

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<v Speaker 1>used to avoid? Are they somewhere in the middle and

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<v Speaker 1>looking a little bit more attractive? I would say I

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<v Speaker 1>would say that some of the more mature technology companies

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<v Speaker 1>are a really good place to be because they do

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<v Speaker 1>have very strong cash flow characteristics and good strong balance

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<v Speaker 1>sheets and relatively strong franchises versus other parts of the

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<v Speaker 1>mortorcixical parts of the economy. And so that is that

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<v Speaker 1>is an area where we have a lot of interest

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<v Speaker 1>in terms of being able to uh to focus on

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<v Speaker 1>on that. Allen, want to thank you very much for

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<v Speaker 1>coming by and spending time with this. Michael Allison. He

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<v Speaker 1>is the vice president and Equity portfolio manager for Eaton

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<v Speaker 1>Events Management, based here in Boston Course home to Bloomberg

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<v Speaker 1>twelve hundred. Thanks for thanks very much for having me.

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<v Speaker 1>Appreciate my pleasure. How We are broadcasting from Smith and

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<v Speaker 1>Woolenski's at Atlantic Wharf at Boston Harbor. This is taking Stock.

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<v Speaker 1>I'm Tim Fox, my co host Kathleen Hayes, and this

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<v Speaker 1>is Bloomberg the mood of the investing public, not from

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<v Speaker 1>economists or analysts perspectives, but from someone in the trenches.

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<v Speaker 1>John Spooner, investment adviser and author, coming up in our

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<v Speaker 1>special Boston show on taking Stock.