March 23, 2023
DIVIDEND BENEFITS
Dear WEALTHTRACK Subscriber,
It’s been quite a week. The Federal Reserve raised its key short-term interest rate for the ninth time in a row, albeit by a modest 25 basis points or a quarter of a point. The new range for the benchmark federal funds rate is between 4.75% and 5%, the highest since September 2007 before the financial crisis hit. Fed Chair Jerome Powell acknowledged the dilemma Fed officials faced, with elevated inflation and a strong job market on the one hand and turmoil in the banking sector on the other. Following two U.S. bank failures a couple of weeks ago, bank stocks have been on a roller coaster. Powell addressed that issue first thing at this week’s press conference announcing the Fed’s interest rate decision: In the past two weeks, serious difficulties at a small number of banks have emerged. History has shown that isolated banking problems, if left unaddressed, can undermine confidence in healthy banks and threaten the ability of the banking system as a whole to play its vital role in supporting the savings and credit needs of households and businesses. That is why, in response to these events, the Federal Reserve, working with the Treasury Department and the FDIC, took decisive actions to protect the U.S. economy and to strengthen public confidence in our banking system. These actions demonstrate that all depositors' savings and the banking system are safe. With the support of the Treasury, the Federal Reserve Board created the Bank Term Funding Program to ensure that banks that hold safe and liquid assets can, if needed, borrow reserves against those assets at par. This program, along with our long-standing discount window, is effectively meeting the unusual funding needs that some banks have faced and makes clear that ample liquidity in the system is available. Our banking system is sound and resilient, with strong capital and liquidity. We will continue to closely monitor conditions in the banking system and are prepared to use all of our tools as needed to keep it safe and sound. Source: Transcript of Chair Powell’s Press Conference March 22, 2023 Dividends are gaining new respect among investors. Having proven their worth in the income-scarce world of the last decade and a half, they once again came to the rescue in 2022’s miserable market. Although dividend-paying stocks did not escape the carnage, they provided considerable protection. Their declines with dividends included - we’re talking total return here - were only slightly worse than investment grade bonds: 12% versus 11%, a third less than the S&P 500’s 19% decline and a fraction of the nearly 40% loss that the non-dividend payers suffered. There is nothing like a sharply lower market to emphasize the protective effect of dividends. Is this the time to step up your exposure to dividend-paying stocks? We are welcoming a new guest to WEALTHTRACK but one with a long-time connection through his mentor and former co-portfolio manager, Hersh Cohen, a Great Investor and one of WEALTHTRACK’s most popular guests over the years. Hersh retired from active management at ClearBridge Investments a few years ago but is still involved in its dividend strategy. Our guest is Michael Clarfeld, Co-portfolio Manager of ClearBridge Investments’ Dividend Strategy and of the ClearBridge Dividend Strategy Fund which Morningstar just named one of “The Best Dividend Funds” for 2023. Since Clarfeld came on board in 2009 the fund’s nearly 12% annualized returns have outpaced Morningstar’s Large Blend category. It trailed the S&P 500’s 13% annualized returns but did better on a risk-adjusted basis. It actually outperformed the market in nine of the eleven periods where the S&P fell more than 10% - one of the reasons it has earned Morningstar’s top analyst ratings. Also of interest, according to Morningstar, when compared to its “dividend-focused category rivals” its “performance has ranked among the best… its total returns ranked in the top quartile across both trailing five and ten year periods.” In this weekend’s interview Clarfeld will explain why high-quality companies with histories of growing their dividends are particularly valuable now. In our exclusive EXTRA feature, Clarfeld will share the most important lessons he has learned working with Hersh Cohen over the years. If you miss the show on public television, you can watch it on our website over the weekend, along with our past programs and our guests’ One Investment recommendations. You can also find the WEALTHTRACK podcast on Stitcher and SoundCloud as well as iTunes and Spotify. Have a lovely weekend, and make the week ahead a healthy, profitable and productive one. Best regards, Consuelo | 
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