The Market For 'Lemons': A Lesson For Dividend Investors

The Market for 'Lemons': A Lesson for Dividend Investors by Research Affiliates

In the latest piece from Research Affiliates, Chris Brightman, chief Investment officer, Vitali Kalesnik, head of equity research, and Engin Kose, vice president, equity research, look at dividend investing, noting that "measuring the quality (reducing our information asymmetry) of the companies whose equities we are considering adding to our portfolio can improve our investment returns."

They write:

"When purchasing high dividend-yielding equities, the challenge is to find high-quality companies at reasonable prices. Simply paying the lowest price for a given dividend is not an optimal strategy. Some high-yield equities are cherries, cheaply priced equity of high-quality dividend-paying companies. Other high-yield equities are lemons, cheaply priced equity...