By James Saft
(Reuters) – What we are witnessing isn’t simply a tumble in high-flying momentum stocks but a rush back into what passes these days for high yields.
While the sometimes stomach-turning falls in stocks like Twitter – down 23 percent this week – get much of the attention, to understand what is actually happening you ought to pay attention to far more boring names like Procter & Gamble, which carries a healthy yield and has outperformed in recent weeks.
This may imply not simply a sudden caution towards unproven business models and high valuations, but perhaps a wider set of concerns about the economy.
While the average stock in the Russell 1000 index is down 2.02 percent since March 5 there is a huge gap between the 300 shares in the index which pay no dividend and the 300 highest yielding, according to Bespoke Investment Group. The momentum shares, for want of a better term, are down more than 7 percent while the high-yielders are up a bit more than 2 percent.
According to Societe Generale data, the single most important characteristic driving equity returns in the past month has been dividend yields. High-dividend stocks in the UK, for example, have outperformed low-dividend ones so far this year by the most on record outside of a bear market.