Yes, dividends. Almost always.
No one is saying dividends always work, but in a period like this why wouldn't you want to select for them in a passive portfolio? A good broker never forgets how powerful high dividend payers can be versus the rest of the market.
Federal Reserve Chairman Ben Bernanke appears on a television screen on the floor of the New York Stock Exchange Thursday, June 7, 2012. When it comes to Bernanke, the Reformed Broker's views are mixed. But on this issue of dividends, he's pretty clear: almost always, yes.
Richard Drew/AP
Why dividends? Jeremy Schwartz has done a lot of great work on the topic building on the groundbreaking research from his colleague at WisdomTree, Prof Jeremy Siegel (yes, your name has to be Jeremy to get a job at WisdomTree, I checked).
Anyway, Ritholtz and I have been constructing our secular bear market core portfolios almost exclusively with dividend-weighted ETFs since January 2011 (before everyone else went nuts for dividends) whenever we do indexes. In a secular bear, you don't want cap-weighted or price-weighted indexes, you want yield and relative value more than you want price momentum. This changes a bit in a lasting bull market, but we ain't there yet.
No one is saying dividends always work, but in a period like this why wouldn't you want to select for them in a passive portfolio? This is the kind of thing that separates good asset management from scattershot portfolios with no clear objective.