Dividend funds are attractive for investors seeking stability, particularly amid geopolitical upheaval and economic concerns about tariffs, fund managers say.GETTY IMAGES
In an economy where the only certainty seems to be uncertainty, there’s a compelling case to be made for dividend funds, managers of leading funds say.
“Dividend funds are especially attractive in today’s environment, as traditional sources of yield remain under pressure and volatility has returned to global markets,” says Bunty Mahairhu, vice-president, portfolio manager and research lead for equities at CI Global Asset Management.
CI’s Global Dividend Fund Series P was a winner in this year’s LSEG Lipper Fund Awards in the three- and five-year Global Dividend and Income categories.
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Dividend funds are attractive for investors seeking stability, Mr. Mahairhu says. “These funds – particularly those emphasizing sustainable and growing payouts – have consistently shown resilience through inflationary and turbulent periods,” he explains.
“Academic studies also confirm that over time, dividend-paying companies tend to outperform non-dividend payers,” says Ali Pervez, who also holds the title of vice-president, portfolio manager and research lead for equities at CI Global Asset Management.
“The discipline of regular payouts forces responsible cash management and more thoughtful capital allocation.”
Income and capital growth
Shane Obata, portfolio manager at Middlefield Ltd., says dividend funds can play a role in every portfolio. “They offer both a growing income stream and potential for capital appreciation.”
Middlefield’s U.S. Equity Dividend Class Series F was a LSEG Lipper Fund Award winner in the three-year class, and its Real Estate Class Series F won in the five-year Real Estate Equity category.
“Dividend funds’ high-quality tilt also helps them to outperform during market downturns. With an aging population and longer life expectancy, the demand for stable income to fund retirement is only increasing, making dividend strategies even more attractive,” Mr. Obata says.
He acknowledges that tariffs and general uncertainty around U.S. trade policies present general challenges to the global economy. “But our fund focuses on long-term growth themes that aren’t likely to be disrupted by temporary or short-term macro events,” Mr. Obata explains.
“More than 80 per cent of the S&P 500 beat earnings expectations [in Q2 this year], proving the resilience of corporates amid policy shifts,” CI’s Mr. Mahairhu says.
The technology sector outperformed, he adds, highlighted by 22 per cent year-over-year revenue growth in the sector. That included “soaring returns” from artificial intelligence leaders such as Nvidia (up 45.8 per cent at the end of Q2 2025) and Microsoft (up 32.8 per cent in that period).
In late October, Nvidia became the first company in history to achieve a US$5-trillion market valuation.
Top benefits of dividend funds
“We see three main draws to dividend funds,” says Oliver McMahon, senior portfolio manager for the RBC Quant European Dividend Leaders ETF, a LSEG Lipper Fund Award winner in the 10-year category.
“They provide stable income by targeting companies that provide investors with a consistent and sustainable source of income. We look for established companies, which should be able to better weather volatility and the fluctuations in today’s macro picture,” he says.
“Changes in geopolitics and market cycles are hard to forecast. In an uneven market like we have today, dividend funds will typically provide less exposure to the more volatile sections of the market, which can provide investors with a smoother investment experience.”
Mr. Pervez says CI uses “a bottom-up, stock selection approach” that emphasizes “secular growth areas” such as AI, European defence, electrification and infrastructure.
“We look for companies with strong balance sheets, a track record of sustainable dividends and genuine growth potential, predominantly across developed markets.”
The exposure of CI global and U.S. dividend funds to sectors such as financials comes from finding durable-growth businesses, not just traditional lenders, Mr. Pervez says. “The fund is currently defensively positioned and, amid stretched valuations in U.S. markets, we are finding more attractively valued dividend opportunities outside the U.S.”
Looking ahead to 2026
Mr. Mahairhu’s outlook for next year is “cautiously optimistic,” he says. “Corporate earnings and capital return programs are strong – buybacks plus dividends are expected to hit a record in 2025.”
And interest rates are generally moving lower. In late October, the U.S. Federal Reserve shaved its key lending rate by 25 basis points to a range between 3.75 per cent and 4 per cent, and the Bank of Canada also cut its key lending rate by a quarter point to 2.25 per cent.
Nevertheless, Mr. Mahairhu warns that with market valuations elevated and macro-geopolitical risk still top of mind, CI is “incrementally more defensive and continues to prioritize quality and value. Key growth themes remain central, but discipline around valuation is increasingly important.”
Middlefield’s Mr. Obata says his outlook for dividend growth is positive, “which is central to our strategy. Our fund focuses on companies with sustainable competitive advantages that are expected to support above-market earnings growth for a minimum of two years.
“We believe that now is a great time to consider dividend-focused [funds] because quality has lagged recently while lower-quality, riskier stocks have been outperforming. It’s only a matter of time before this trend reverses.”