Corporate spending tilted toward shareholder-friendly activities

Kelley A. McKee, CFA
Portfolio Manager, Equity Analyst, Small-Cap Value / Mid-Cap Value Equity

So, a very topical question in the news these days is whether companies have been engaging in large share repurchase programs at the expense of investing for future growth.

One of the indicators that we follow and that is a broad market indicator is looking at capacity utilization within the industrial landscape. And normally when that number crosses, the critical level is 80. And that normally signals that companies need to invest for future growth. Over the past few years, with modest economic growth, that number has not hit that critical level. Now it’s not to say that companies haven’t been investing, because they have, but they’ve been more selective. And we like the fact that companies have remained disciplined in where they invest.

In the meantime, with healthy corporate margins as well as strong balance sheets, companies have had excess cash to give back to shareholders in the form of dividends and share repurchase programs. Now once the economy picks up, we do think that companies will respond and invest in the areas that they need to.

Dividend growth among the most friendly of activities to watch

Christopher S. Beck, CFA
Chief Investment Officer — Small-Cap Value / Mid-Cap Value Equity

To me, the important thing going forward potentially is that dividends may go up much faster than earnings. That can be the unexpected tailwind for stocks over the next couple of years. People are looking for what may make stocks go in what is probably going to be a very modest economic growth environment. Dividend growth that’s well in excess of earnings would be a positive for the market and certainly for those individual stocks.


The views expressed represent the Manager’s assessment of the market environment as of August 2015, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the Manager’s current views. The views expressed are general in nature and do not relate to a particular mutual fund.

Information is as of the date indicated and subject to change.

Carefully consider the Funds' investment objectives, risk factors, charges, and expenses before investing. This and other information can be found in the Funds' prospectuses and their summary prospectuses, which may be obtained by visiting delawarefunds.com/literature or calling 800 362-7500. Investors should read the prospectuses and the summary prospectuses carefully before investing.

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Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.

Investments in small and/or medium-sized companies typically exhibit greater risk and higher volatility than larger, more established companies.

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