The leftmost chart shows Citi’s cash cows have enjoyed 27% gains year-to-date — a full 10 percentage points more than MSCI All-World Index. In addition, on the right, the dark blue line shows their performance against a plethora of different investment approaches — and the cows are crushing.
Citi’s unique strategy favors an overweight in both consumer staples and information technology sector — areas of the market which have had an exceptional year thus far.
To further their point, Citi’s strategists highlight the decreasing trend in the ratio of global investment-to-payout dating back to 1995, which is important for big-picture context.
This metric takes the sum of capital expenditures and research and development, and then divides by the sum of dividends and buybacks. A falling ratio indicates more payouts, and less investment — something investors have clearly been clamoring for. It’s also a trend in which Citi believes will continue further.
On top of this, the cash cow’s median payout yield — which equates to dividends plus buybacks/share price — is trending almost one full percentage point higher than global stocks. A notion that helps sweeten the pot for investors interested in the strategy.