Portfolio picks: What do Dr. Pepper, Taco Bell, and UnitedHealth have in common?

“The other thing that these companies have in common is they pay attractive dividends, and those dividends have grown at a healthy clip over time. All of these companies have actually grown their dividends in the double digits in recent years. What we’ve seen is that proven dividend growers can definitely help bolster returns when inflation is rising. Our work shows that over long periods of time, nearly half of the market’s return comes from dividends. So, for me, companies with pricing power and growing dividends are very attractive in this market environment.”

When structuring portfolios, Wagner is also optimistic that bonds will recover in the next two or three years and resume their role as a portfolio diversifier and hedge against equity volatility.

“Investors looking at their portfolio should view the negative returns and bonds as an incredible opportunity,” she said, “because bonds mature and those returns will all come back and more. It’s just a matter of time.”

Wagner expects volatility to continue this summer as inflation remains elevated, so she’s encouraging advisors to add high-quality bonds to clients’ portfolios to protect against equity volatility and generate income.

But, she and Capital Group are also keen on innovation – and finds it in both the product and services side of healthcare, where there are currently attractive valuations on real earnings and cash flow. Several companies, such as Eli Lilly and Novo Nordisk, are developing a new generation of drug to treat obesity, which is expected to impact lifespan and quality of life as well as reduce health care costs. Pfizer and Novartis are investing in genetic medicine to deal with diseases at the gene level, and companies like UnitedHealth are transforming how health care is being delivered in the U.S. Its new model rewards doctors for keeping patients healthy rather than seeing more patients, which she said is producing better health outcomes from high patient and physician satisfaction to lower per capita costs. She said: “It’s coming to a physician practice near you very soon.”