Dividend Reliability During A Recession

Introduction

Given the ample historical evidence, this seems to be a classic scenario surrounding a yield curve inversion before a recession. None of the leading indicators are clearly signaling that this time could be different.
- Who Wants To Bet Against The Yield Curve: Is This Time Different?, St. Louis Fed, Carlos Garriga, Vice President and Economist, and Matthew Famiglietti, Research Associate
I have been a total return investor all of my life, but frequently discuss strategies and funds with a dedicated income investor. The primary difference is how we see risk. To me, risk is the permanent loss of capital or not meeting financial objectives. To the income investor, risk is probably best described as a reduction in your income stream. This article is about viewing risk from both sides of the fence.
There are increasing indications about the likelihood of recession occurring next year making dividend cuts a topic of interest to me. For this article, I extracted 173 lower-risk funds from the Mutual Fund Observer database in 46 different categories that were paying dividends prior to the 2007 bear market starting.
I selected the funds based on their risk-free yield divided by the Ulcer Index (Risk), Martin Ratio (Risk-Adjusted Return), Expense Ratios, Yields, and Returns during the 2007 Bear Market. Closed end funds (135) were selected following the guidelines described in "5 Best CEFs To Buy For October 2019" by Financially Free Investor using... Read more