By Lawrence C. Strauss

Jenny Van Leeuwen Harrington discovered dividend investing nearly a quarter of a century ago, and she hasn't looked back. The portfolio manager finds that income offers not only a path to steady returns but also a source of comfort when the stock market hits maximum turbulence. "What's interesting about this strategy is that, in a way, you're badly punished if you get out in the worst of times," she observes. Her words are particularly relevant for investors trying to figure out their next steps in markets getting slammed by tariffs being rolled out by the Trump administration. Harrington, 49, is also the CEO of Gilman Hill Asset Management, which as of March 31 had $900 million under management across three strategies: U.S. equity income, international income, and disciplined growth.

The equity income strategy, which Harrington runs, looks for holdings among stocks, real estate investment trusts, master limited partnerships along with convertible preferred and preferred securities. It aims for a 5% dividend yield and capital appreciation. Harrington just published a book titled Dividend Investing. The subtitle -- Dependable Income to Navigate All Market Environments -- resonates in the current market turmoil. Speaking with Barron's Advisor, Harrington talks about the role of dividend investing in volatility, the way she separates legitimate opportunities from traps, why she likes Conagra, and how she has a surprising number of 20- and 30-somethings investing with her.

How did you become an investor with such a big focus on dividends? I was at Neuberger Berman managing a plain-vanilla core portfolio. In late 2001, I received a call from a client, and he told me, "I'm getting ready to retire, and I need income. But I'm only 55, so I also need growth. What can you do for me?" So I transitioned his portfolio from a plain-vanilla core strategy to one that while still a core U.S. stock strategy, it also had the objective of having a 5% or better dividend yield on top of it.

If it had been all in bonds, my client would have had just the income. But because he was so young, he needed the growth too. So with this revamped portfolio, he didn't just have the growth from the capital appreciation of the stocks -- he also had the growth of the dividends. The S&P 500 dividends over time have grown by about 5.7% a year. Coincidentally, the strategy that I manage has seen the same level of annual dividend growth. When you're getting that kind of income and it's growing, you actually can outpace inflation.

What were the options 25 years ago for investors who wanted equity income? Back then there were few equity-income strategies. There were REIT strategies, and there were utility strategies. There were hardly any MLP strategies, because there weren't that many MLPs trading back then. There were some REIT-utility strategies. So the whole idea of equity income started to take off as bond yields got lower and lower -- and people who needed income had to seek it out. Prior to the 1990s, the S&P 500 yielded more than 3%. And then, as the dot-com boom took off in the late-1990s, old-economy stocks weren't rewarded. You had to seek out dividend stocks.

Bond yields have bounced around amid the volatility, but they are definitely higher than a few years ago. How has that affected your investing approach? When I started using this strategy in the early 2000s, the 10-year Treasury's yield was at about 5%, and it was still very, very compelling. Even though bond yields have gone up recently and it puts some pressure on bond proxies like REITs, the reality is what was true then remains true today, notably all you get from bonds is your income. A lot of people need not just income, but also a growing income stream. And they need capital appreciation. So even with bond yields up higher than they had been, they're not a real competitive threat to people who need a growing and consistent income stream.

You write "The comfort, clarity, and consistency of a dividend income stream gave me the confidence I needed to be a successful investor." Could you elaborate? Stepping aside from equity income, every good investment advisor and every good portfolio manager knows that the real key to success is not trying to time the market. It's really about just setting the strategy and sticking with it. It's not about trying to get around the recessions or trying to avoid the recessions or the market corrections -- rather, it is just getting through them, because you don't really know when those are coming.

What's interesting about this strategy is that, in a way, you're badly punished if you get out in the worst of times. So when we're going through a March of 2020 and the market's down 30% due to the pandemic and people are freaking out, for a growth investor the question is, "Do I get out now and get back in later?"

For someone who's in it for the dividend income, that is a more complex equation. It's, "If I do get out now, my income disappears." If, for example, you have a million dollars invested and you're getting $50,000 a year of income, your income disappears. That's a very different calculation, and that's one of the things where you can look at the companies in your portfolio and say, "Hey, my income is still coming to me. How bad can it really be? Just because the stock price is down, the company is still healthy." It encourages better behavior by increasing the negative consequences of succumbing to emotions. You can say, "If the income is coming in, that business must be pretty healthy." That's where you can separate the health of a business from the mercurial nature of the stock market.

How do you assess the market's recent volatility? In times of maximum uncertainty like we're in right now, one of the nice things that a dividend stock offers is a high component of certain return. If you're buying something with a 6% dividend yield -- and you've done your homework and you know you're getting that dividend yield -- that return is highly certain. But with a growth stock, 100% of the return is uncertain.

Stocks with yields in the 5% range can be risky, partly because their dividends might not be secure. How do you separate opportunities from traps? That's the hard part, and that's why it actually takes a lot of work to manage this kind of strategy. If you were to run a screen searching for every stock in the U.S. with a yield above 3.5% and a market cap above $150 million, you would probably end up with 300-400 stocks. Of those, a huge majority aren't investible because the dividend's probably not that secure. It's certainly not secure enough to create a durable income stream, such as when you're in periods of major market disruption.

I like to start the process by weeding out who's really going to pay you that 3.5% or better dividend yield. It's easy to look at the numbers and say, "OK, do they have a trajectory and a history of paying that dividend consistently?" We have two horribly distorted, disrupted markets in recent memory that we can look to -- the Great Financial Crisis earlier in this century and the pandemic. If you see a company that's actually made it through those periods and continues to pay its dividend, there's a pretty good chance that the company is committed to paying that dividend.

However, the more challenging part of the analysis is to figure out what a company's management and board's philosophy is behind paying that dividend. Do they say they are committed to the dividend? That's what you're looking for. You can have two very similar companies, but one chooses to pay out dividend income and the other doesn't. And that really, really matters.

What made you write a book now on dividend investing? It's important for people to remember that there's not just one way to invest your portfolio. The extreme outperformance of those top 10 stocks, including the Magnificent Seven in recent years, seems to have lulled people into thinking that there is only one way to invest. I like to remind people that a portfolio is a pragmatic tool. You saved all this money for so long. Make that portfolio work for you in the right way over the long run. You can choose the strategy that's right for you.

I think the timing of this book might be very good, because it's just a reminder that there are different ways to invest. The dividend strategy that I use brings both emotional comfort and a useful, pragmatic portfolio. The book was written using a dividend-specific lens, because that's what I do, but I really tried to write it for a much broader investment audience.

How receptive have younger investors been to dividend investing? People have been tossed about by the stock market over the past 10 years, and maybe some of the younger investors got into more speculative holdings, like crypto or NFTs [nonfungible tokens]. Or they bought some of the Magnificent Seven at the wrong time.

There's something comforting about a strategy where income is consistently delivered into their account. I do have a surprisingly large number of clients in their 20s to mid-30s who've inherited some money. These clients tend to be highly educated, but they are not in high-paying careers -- more like teaching or the arts. What they've found to be quite wonderful is putting their money in dividend stocks and having it create a little bit of supplemental income. It might be $1,000 a month extra. Or maybe it's $2,000 a month. But it's really, really meaningful and very, very comforting for those clients. They feel like they can just set the portfolio aside. They don't need to stress out about the market. But they really appreciate the consistency of that income just dropping into their accounts.

What's an example of a dividend stock you hold at the moment? Conagra Brands is a consumer staple company. They make food under brands such as Duncan Hines and Hunts. Two things have really pressured the share price. First, there was the threat of GLP-1 weight-loss drugs and the reduction in calorie consumption in the U.S. as people started using Ozempic and other weight-loss drugs. But then the real pressure came last fall, when it became increasingly anticipated that R.F.K. Jr. would be nominated to lead the U.S. Department of Health and Human Services. His Make America Healthy focus pressured the stock, along with others in the sector.

But to us, it looked like Conagra was unfairly punished, because it has a much healthier product line than most of its peers. Along with a 5.4% yield, it has maybe 3% or 4% earnings growth ahead. The stock trades at roughly 11 times earnings, about half that of the market. So I'm going to get a 5.4% dividend yield if I buy it today, and that's likely to grow. Plus, if the stock appreciates at the pace of earnings, say 3% or 4%, my total return should be around 8.5% in the environment we're in. That sounds pretty favorable to me.

Thanks, Jenny.

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April 22, 2025 15:51 ET (19:51 GMT)

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