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The views expressed herein do not constitute research, investment advice or trade recommendations, do not necessarily represent the views of all AB portfolio-management teams and are subject to change over time.
Maintain a Growth Equity Engine in a Multi-Asset Income Strategy
3 min read
A healthy mix of income and growth potential may yield a more effective equity allocation.
A disciplined multi-asset income strategy should draw from a broad range of asset classes, including a healthy mix of equities. But investors who limit their equity exposure to high-dividend stocks may miss out on important growth potential.
A Shrinking Pool of Dividend Payers Could Lead to Concentration
The universe of high-yielding stocks is getting smaller and more concentrated. Many equity markets, especially the US, are dominated by growth companies that usually reinvest profits rather than distribute them to shareholders. Dividend levels are falling as a result, with only a minority of firms now paying 3% yields or higher.
This may lead investors focused solely on income to create unintended biases and miss growth potential. For example, today’s high-dividend universe is underweight both technology and communications, which offer robust growth prospects. It’s also underweight the US equity market (Display); we don’t think investors—even income investors—should ignore what we see as US exceptionalism and AI-driven growth.
High-Dividend Focus Can Underweight Key Growth Industries and Regions
Current analysis does not guarantee future results.
High-dividend represented by the MSCI World High Dividend Yield Index; global represented by MSCI World Index
Percentages may not add up to 100 due to rounding.
As of January 31, 2026
Source: MSCI and AllianceBernstein (AB)
By contrast, high-dividend strategies tilt more toward Europe and lean hard into consumer staples, healthcare, energy and other “old economy” sectors known more for high payouts than growth potential. Traditional high-dividend approaches also tend to prioritize defensive sectors, which may be less volatile but also less likely to fully capture market upside.
In our view, this reinforces the principle that multi-asset income investing should harness both dividend generation and growth potential.
Quality Is a Key Ingredient in Income Investing
Whether investors are tapping stocks for dividend or growth potential, we think it’s critical to zero in on the right ones.
Sometimes, high dividends are accompanied by weak fundamentals, whether it’s from the headwinds of declining industries or payouts that are unsustainable. Active quality filters may help avoid such traps by identifying stocks with stable or growing dividends. Based on our research, dividend growers and firms returning cash via both dividends and share buybacks have fared better than those paying high but static dividends.
Prioritizing the selection of high dividends at the expense of identifying quality growth could leave a lot of return on the table, as we can see by comparing the earnings growth between global and high-dividend stocks (Display). Over the past decade, quality sources of corporate earnings growth have historically had better upside than purely dividend-focused stocks.
Firms With Consistent Earnings Growth Have Outperformed
Cumulative Relative Performance and EPS Growth, 100 = January 31, 2016
Current analysis does not guarantee future results.
Relative performance and relative earnings-per-share (EPS) growth represented by MSCI World Index vs. MSCI World High Dividend Yield Index
As of January 31, 2026
Source: MSCI and AB
Benefitting from Exposure to Secular Growth Trends
Investing early in select growth companies helps investors tap into today’s secular growth trends like AI, cloud computing, healthcare innovation and others. As we see it, if US equity exceptionalism continues, all the better for income investors who own a share of it through their diversified income strategy. Over time, that exposure has the potential to deliver attractive total returns that outpace inflation, even if it’s not generated directly from dividend income.
In our view, a multi-asset income strategy needs both growth and income to fire on all cylinders. Today’s historically high bond yields means investors don’t have to lean heavily into dividend payers for income on the equity side, leaving room for select growth names that might otherwise be missed, along with their attractive upside potential.
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MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
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Investment involves risk. The information contained here reflects the views of AllianceBernstein L.P. or its affiliates and sources it believes are reliable as of the date of this publication. AllianceBernstein L.P. makes no representations or warranties concerning the accuracy of any data. There is no guarantee that any projection, forecast or opinion in this material will be realized. Past performance does not guarantee future results. The views expressed here may change at any time after the date of this publication. This article is for informational purposes only and does not constitute investment advice. AllianceBernstein L.P. does not provide tax, legal or accounting advice. It does not take an investor's personal investment objectives or financial situation into account; investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or an offer of solicitation for the purchase or sale of, any financial instrument, product or service sponsored by AllianceBernstein or its affiliates. This presentation is issued by AllianceBernstein Hong Kong Limited (聯博香港有限公司) and has not been reviewed by the Securities and Futures Commission.