Federated Tells Investors To 'Re-Risk' Via Yields
April 4, 2011
The only things certain in life are death, taxes and, according to Federated Investors, dividends.
At a time when the markets are expected to return mid-single-digit returns and to remain volatile for the foreseeable future, at least yields are certain, Federated tells investors in a new advertising campaign-its first significant promotion in eight years. And while companies cut their dividends in 2008 and 2009, they are on their way back-big time, the company says.
This is precisely why Federated is showcasing one fund, the popular $2.5 billion Federated Strategic Value Dividend Fund, in its first large-scale advertising campaign since 2003. While Federated offers other income funds that hold dividend-paying stocks, this is its only fund wholly focused on this style of investing.
With a change in investor sentiment to slowly "re-risk" and growing recognition among large and regional wirehouses for the benefits of dividend-paying stocks, said J.T. Tuskan, director of marketing and corporate communications, the fund has proven to be one of Federated's best-selling funds. Assets in the fund exploded 131% last year, primarily due to sales, surging from $950.5 million at the end of 2009 to $2.2 billion at the end of 2010, Tuskan noted. And in the first two months of this year, assets grew another 14% to $2.5 billion.
The campaign, which kicked off at the beginning of March and will run through early July, is aimed at intermediaries and high-net-worth investors and centered around print ads running in Financial Planning (which, like Money Management Executive, is a SourceMedia publication), as well as Barron's, InvestmentNews, Financial Planning, Registered Rep and Financial Advisor. Online ads are running on Barrons.com, InvestmentNews.com, WSJ.com and Bloomberg.com.
These ads are supported with promotional materials on Federated's homepage, and a microsite showcasing videos of the portfolio managers and whitepapers explaining the merits of dividend investing (http://dividendinvesting.federatedinvestors.com) and e-mail and direct mail campaigns to the broker-dealer sales channel.
The headline of one print ad reads, "A Portfolio of Stocks With a History of High-Dividend Payments." The kicker is, "What a Novel Idea." The visual shows a close-up of a satisfied-looking woman investor, alongside a lightbulb to represent a new way of thinking.
Promotional materials at Federated's microsite highlight Federated Strategic Value Dividend Fund's strong performance. The fund has delivered 19.60% in the trailing 12 months through Feb. 28, 2011, 10.95% in 2010 and 11.64% in 2009.
Promotional materials on Federated's homepage tell investors the fund has "an unwavering focus on dividends and seeks to deliver both income and long-term capital appreciation by investing in stocks of undervalued companies that pay above-average dividends."
Federated stresses that since investing in the stock market is unpredictable, including a fund that pays dividends is a wise inclusion for any portfolio-even for that of an aggressive investor.
"For many, investing in the stock market has become an exercise in trying to buy low, sell high and repeat frequently," Federated tells investors at its website. "But investing with a focus on dividends is a time-tested approach. Dividend-paying stocks can be a crucial component of virtually any investor's portfolio. "
The microsite goes on to say that the fund may be a good choice for risk-averse investors or those looking for diversification, since the fund strives for low correlation to the Standard & Poor's 500 Index.
Most compellingly, under the heading "Dividends Drive Markets," Federated tells investors that dividends have contributed to almost half the stock market's long-term total return. The S&P 500 has delivered an average of 9.8% a year between 1926 and 2001-but if dividends were removed, that average would drop of just 5.5%, Federated notes.
And now is an opportune time to invest in dividend-paying stocks, the fund's two portfolio managers, Walter C. Bean and Daniel Peris, say in their commentary: "Dividend growth continues to develop at an attractive pace. While 2008 and 2009 proved to be the worst dividend-cutting episode in history, we were pleased to see the return of increasing dividends in 2010. To this point, the fund captured 42 dividend increases in the year. If we count back to our last notable dividend cut with Pfizer in April of 2009, we have since realized 61 dividend increases. The implication here is that, in a little more than a year and a half, virtually every holding in the portfolio has raised its dividend with several holdings raising their dividends more than once. As a result, the trajectory for dividend growth is quite positive heading into 2011."
Federated will also be promoting a book that Peris wrote that is debuting this month, "The Strategic Dividend Investor" (McGraw-Hill, 2011).
As to why Federated decided to promote a single fund, the decision was based on the results of a limited advertising campaign the company piloted in the fall showcasing five funds, Tuskan said. Those were: the Federated Strategic Value Dividend, Prudent Bear, International Leaders, Intercontinental and Emerging Market Bond funds. The ads ran solely on Morningstar.com and Barrons.com.
Explaining why has it been eight years since Federated's last advertising push, Tuskan says that Federated spent its resources in that time aggressive acquiring the assets of a number of equity and money market funds and separately managed accounts. Indeed, Federated acquired more than two dozen funds, boosting its $276 billion in assets under management by more than $20 billion through the acquisitions. One of the biggest deals was the 2010 purchase of $17 billion in money market fund assets from Sun Trust Bank.
"Our CEO kids me from time to time when I am looking for marketing dollars that I am competing with business uses of those dollars," Tuskan said. "That has been the case for the past few years."
Perhaps if assets in the Federated Strategic Dividend Income Fund continue to swell, Federated will decide to showcase other timely and successful funds in other advertising pushes as well.