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By Josh Peters, CFA and Jeremy Glaser | 12-09-2015 09:00 AM

As Dividend Growth Slows, Focus Will Shift to Yield

As dividend-growth tailwinds fade, investors should focus on high-yield stocks that can continue to pay and grow their dividends, says Morningstar's Josh Peters.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. I'm here with Josh Peters. He is the editor of Morningstar DividendInvestor newsletter and also our director of equity-income strategy. We're going to look at the prospect for dividend growth in the years to come.

Josh, thanks for joining me.

Josh Peters: Good to be here, Jeremy.

Glaser: Looking back over the last couple of years, dividend growth has actually looked pretty good. Do you think that this is a trend that can continue? What's your outlook for where dividends could go?

Peters: It's not going to keep up at this pace. We're coming off a series of years here now where the S&P 500 Index, as a whole, has had dividends growing at a double-digit rate. Some of that is recovery from the dividend cutting that took place from 2007-09. But the last couple of years, it's been dividends growing faster than earnings. Earnings growth has slowed down, especially in some sectors that do have some big dividends like energy. And historically, it's very unusual to have the kind of dividend growth that we've had for the market extend for more than just a couple of years. That's a trend that I think is going to change. I don't tend to think in terms of a one-year outlook, but when I think about the next five years, I think dividend growth is going to come down quite a bit for the market as a whole.

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