Dividend stocks can help lower your risk. Many -2-

If you had purchased shares of Broadcom on June 11, 2019, you would have paid $283.48 a share and the annual dividend at that time was $10.60 a share, making for a then-current yield of 3.74%. As of Tuesday's close, the share price had risen 415% to $1,461.03. The annual dividend payout had nearly doubled to $21. So an investor buying shares at Tuesday's close would be looking at a dividend yield of only 1.44%. But your yield on your five-year-old shares, based on what you paid for them, would be 7.41%.

Broadcom is an extreme example because it has provided so much growth while doubling the dividend Kirby said he had been holding it in the fund for seven or eight years. "We still think Broadcom has a lot of potential," he said, because of its high level of participation in the artificial-intelligence build-out relative to most competitors in the semiconductor space.

Home Depot Inc. (HD) - the fund's 10th largest U.S. stockholding - is another interesting example. If you bought the stock five years ago, your dividend yield initially was 2.75%. It would have risen to 4.55% for your five-year-old shares while the stock price had gone up 70%. Home Depot's five-year total return with dividends reinvested has been 91%, which has trailed the S&P 500's return of 102%.

On the other side of the spectrum is AT&T Inc. (T), which is a newer holding for the fund. AT&T cut its dividend in 2022 as part of its complicated deal to divest former Time Warner assets when Warner Bros. Discovery Inc. (WBD) was formed. In retrospect, AT&T has hurt shareholder value by overpaying for those assets and for DirecTV, which it acquired in 2015.

Based on the current yield of 6.22%, a high level of free cash flow and his expectation that AT&T's leadership will follow "a more sensible strategic approach," Kirby believes this stock can be "a low-teens total-return compounder for the next two to three years."

Fund performance

The Thornburg Investment Income Builder Fund is rated five stars (the highest rating) within Morningstar's Global Allocation/Large Value fund category. Here's how it has performed over several periods through June 11:

     1-year return  3-year average return  5-year average return  10-year average return  15-year average return 
   Thornburg Investment Income Builder Fund - Class I             17.37%                  7.05%                  8.65%                   6.37%                   8.85% 
   Morningstar Global Allocation - Large Value category           11.01%                  0.87%                  5.28%                   4.05%                   6.60% 
   Morningstar Global Allocation Index (U.S. dollars)             12.94%                  0.85%                  6.09%                   5.40%                   7.23% 
   Fund percentile ranking within category                             7                      1                      5                       7                       5 
                                                                                                                                                   Source: Morningstar 

Kirby said that since the fund's Class I shares were made available late in 2003, the annualized return for this share class has been about 9.2%, with about half of the return coming from dividend payments and the other half from capital appreciation.

"There is a structural long-term argument for investing in dividend strategies," he said, acknowledging that the outperformance of growth stocks has made for "a near-term argument the other way."

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-Philip van Doorn

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06-15-24 0631ET

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