Title: Creating a high dividend stock strategy while exploiting the low beta anomaly

Authors: Richard Cloutier Jr.; Danielle Xu

Addresses: Washington Trust Bank, P.O. Box 2127, Spokane, WA 99210, USA ' School of Business Administration, Gonzaga University, 502 E. Boone Ave. Spokane, WA 99258, USA

Abstract: Dividends comprise a large portion of a stock's total return. Given the ageing of our population, the current low income environment, the lack of differential tax treatment of qualified dividends and capital gains, the demand for an efficient high income equity strategy has increased. We present a trading strategy combining high dividend paying stocks with low beta stocks that has provided better returns than the overall market with substantially lower systematic risk. In addition, this strategy provides better raw returns and higher Treynor and Sharpe ratios than the market during a period of rising interest rates, generally a period that does not support income sensitive assets.

Keywords: stock trading strategy; high dividends; low beta; Sharpe ratio; Treynor ratio; stock returns; interest rates.

DOI: 10.1504/IJRM.2015.073835

International Journal of Revenue Management, 2015 Vol.8 No.3/4, pp.324 - 342

Received: 28 May 2015
Accepted: 12 Sep 2015
Published online: 23 Dec 2015 *

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