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At the recent Morningstar Investment Conference in Chicago, a panel of three income managers categorically denied that the dividend bubble has burst. Of the panel's three managers, Jesper Madsen of Matthews Asia Dividend Fund acknowledged the greatest degree of adaptation. That's partly because of the fund's dual focus on yield and total return. In Asia, as in the rest of the world, the markets have rewarded stocks with stability, yield and low beta. As a result, Madsen has been dialling down the fund's focus on yield for the past few months and focusing more on total return and growth.
Madsen said that talks of governments easing stimulus efforts particularly cause jitters in Asia, which has made the more cyclical areas of the market more attractive. Sectors and industries that look particularly attractive include consumer discretionary companies in China and petrochemical firms in Korea. Meanwhile, recently announced monetary policy changes in Japan have caused that market, including its dividend payers, to get ahead of itself. Madsen believes that the other two legs of Japanese economic growth—fiscal policy and structural changes to the economy—need more time for their effects to work through the market.
Hersh Cohen of ClearBridge Equity Income said he looks primarily for growth in yields for his strategy, and he conceded that a few dividend-focused areas have become extended on a P/E basis. Sectors such as consumer staples and utilities, for example, have seen pullbacks in price in the last few weeks. On a current yield basis, though, Cohen still finds them attractive and still considers the market in the midst of "The Golden Age of Dividends," after years of being out-of-favour. In the last few years, for instance, dividends, excluding those of banks, have grown 8%-plus per year. Even including banks, growth in dividends has reached about 5% annually, he said.
John Spears of Tweedy Browne Worldwide High Dividend Yield Value said that it's been business as usual for the last 30 years, where he and his team construct portfolios on a "brick-by-brick" basis and look for firms paying at least a 4% dividend. Still, Spears' portfolio and its inclusion of 
Cisco Systems (CSCO) has been a surprise, at least for Morningstar analyst and moderator Daniel Culloton. Spears looks at a firm's business model, sustainability of income, free cash flow and level of debt when assessing a firm's ability to sustain its dividend, and the story at Cisco made sense to him. The firm has no debt and was valued at 11 times earnings before interest and taxes--roughly 50% more than its stock price at Tweedy Browne's purchase.
Cohen added that ClearBridge owns Cisco, as well. Technology-sector companies have evolved into reliable dividend payers over the years, a pattern started by Microsoft's (MSFT) decision to pay a dividend, which was followed by peers such as Intel (INTC) and then Cisco. Those firms broke the mould that tech companies couldn't be considered growth companies if they paid a dividend. That's led to companies like Texas Instruments (TXN) (up 26.3% for the last 12 months through June 12, 2013) increasing its dividend by a third this year.
