The following is a summary of a UBS full-length report on this topic,
dated April 28, 2006.
* UBS Wealth Management strategy snapshot:
* UBS WMR expects decelerating economic growth to affect both equities and bonds during the second quarter. Steady, albeit slowing, earnings gains combined with reasonable valuations should produce moderate single-digit equity returns, while Treasury yields are likely to remain range-bound though 2Q.
* Select opportunities:
* Market uncertainty surrounding the end of the Fed tightening cycle and higher valuations across income-generating asset classes may limit the performance of many yield-oriented investments. That said, we identify select opportunities for generating income while also managing risk.
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* Dividends still matter:
* With equity market returns likely to be modest, the dividend component of investors' total return is even more significant. We continue to prefer the financial sector as a source of “dividend plays” over higher-yielding telecom and utility sectors.
* Investment recommendations:
* Our recommendations include leveraged senior loan closed-end funds, REITs with strong operating models, and MLPs with strong distribution growth potential. In addition, we highlight recently upgraded Neutral-rated preferreds and "dividend ruler" stocks that offer attractive yields and strong fundamentals
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