Issue link: https://info.seic.com/i/1495701
10 INVESTMENT THEMES FOR 2023 · 1 Caroline Randall is an equity portfolio manager with 25 years of experience. She is a manager for Capital Income Builder®. Dividend investing may have seemed downright dull over the last decade as tech titans dominated market returns, but today, boring is beautiful. With growth slowing and the cost of capital rising, I expect dividends to be a more significant and stable contributor to total return going forward. Dividends accounted for only 16% of total return in the 2010s, but historically the average has hovered around 38%, peaking at 72% during the inflationary 1970s. As the prominence of dividends rises, so does the importance of evaluating each company's ability to pay them. I spend a lot of time checking financials and talking with management to get a feel for the health of a business. I'm looking for businesses with pricing power and the capability to grow earnings and dividends at a sustainable level. Those companies have the potential to be compelling investments, especially when markets are volatile. I'm finding many opportunities across sectors, including industrials, utilities and health care. Pharmaceutical companies can be attractive in an inflationary environment, as many tend to have strong balance sheets and cash flows and are often able to raise prices even in a highly competitive marketplace. Several leading companies also have a dividend yield above 3%, including AbbVie (3.7% yield, as of December 31, 2022) and Gilead Sciences (3.4%). 1. Dividend decade *Total return for the S&P 500 Index was negative for the 2000s. Dividends provided a 1.8% annualized return over the decade. Source: S&P Dow Jones Indices LLC. 2020s data is from 1/1/20 through 12/31/22. Past results are not predictive of results in future periods. 66% 27% 42% 72% 25% 14% NA* 16% 21% 38% 0 4 8 12 16 20% 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s 2020s Jan 1926 — Dec 2022 S&P 500 Index annualized total return (%) Dividend contribution to total return Total return HISTORIC AVERAGE Expect dividends to account for a larger portion of total returns