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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Miller/Howard sees high-yielding dividend stocks offering superior risk-adjusted returns as broad market valuations reach extreme levels. The S&P 500's dividend yield hit a 55-year low while its P/FE ratio of 20x suggests future 10-year returns of only 4%."
Miller/Howard argues that high-yielding dividend stocks offer compelling relative value as the S&P 500's dividend yield fell to its lowest level in over 55 years, driven by price appreciation in concentrated tech holdings rather than declining dividend payments. The equity risk premium has returned to nearly zero as stock multiples expanded on AI-driven growth expectations while the Fed raised rates to combat inflation. The S&P 500's price-to-forward-earnings ratio of approximately 20x is well above historical averages and at levels only surpassed during the Dot-Com Bubble and COVID rebound. High starting valuations are historically associated with lower future returns, with the current S&P 500 multiple suggesting subsequent 10-year returns of only 4%. In contrast, high-yielding stocks trade at a P/FE of 16.4x within the broader investable universe, historically associated with forward 10-year returns of 7.4%. The firm emphasizes that high-yielders' compressed starting multiples combined with consistent cash returns create structural downside protection and more consistent long-term returns, with no 10-year period of negative returns over the sample period studied. Miller/Howard views the current environment as particularly favorable for their dividend-focused strategy.
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