Dividend stocks aren’t evergreen, but investing in them over several years can pay off, according to one portfolio manager. Their underperformance this year presents an opportunity, said Ben Kirby, who is also co-head of investments at Thornburg Investment Management. “Dividend investing goes in and out of favor from one year to the next, but over the course of a multi-year period, it’s a very robust strategy,” he told CNBC this week. “Whenever you have a year like this, where a bunch of high-quality dividend-paying stocks have underperformed, it’s a fat pitch and an opportunity to add that exposure to your portfolio,” he added. The SPDR S & P Dividend ETF (SPYD) has a total return of -3.5% so far this year, according to FactSet. The SPDR S & P 500 ETF (SPY) has a total return of over 18%. He isn’t the only one to appreciate dividend stocks right now. Neuberger Berman senior portfolio manager Sandy Pomeroy told CNBC earlier in August that dividend stocks haven’t been this cheap since the tech boom of the 1990s. “They went on to have a great decade. They were the outperformers for the next 10 years and that could happen again, in our mind,” she said. Stock picks Kirby urged investors to focus on stocks with “diverse and durable” income in their portfolios, instead of Big Tech. He named five such stocks. TSMC : The Taiwanese chipmaker is trading at 14 or 15 times earnings, and is “one of the best businesses in the world,” Kirby said, adding that they grow their dividend over time. “They are essential in the global supply chain.” He said although Taiwan will remain a hot spot of geopolitical tensions, he likes it as a long-term holding. TSMC pays out a yield of around 2%. CME : Kirby expects the derivatives exchange will “benefit” from volatility in September, a traditionally weak month for stocks. “Whenever volatility goes higher, as it often does in September … people want to hedge more,” he said. “And the more that they hedge that drives volumes,” he said of CME. Investors can trade futures and options at CME in order to manage risk. The need to hedge will be greater when rates are high, Kirby added. “So we think this is going to be a mid-teens earnings grower paying about a 4% dividend that’s going to be really hard to beat.” Charles Schwab : Kirby said the bank is a “contrarian pick” — it tumbled this year because of high rates — but its core business remains strong. The stock used to trade at a 25% premium to the market, but today it’s at about a 20% discount to the market, Kirby said. He predicts the stock will jump to $100 in the next 12 months — representing potential upside of about 67%. TotalEnergies : The stock has a 5.5% dividend yield, 12% free cash yield, and a “great balance sheet,” Kirby said. Orange : Kirby said the French telecommunications giant has “strong pricing power.” It’s yielding over 6.7%.
