By: David Sterman of Street Authority
In the early stages of the bull market, investors flocked to companies with steady and growing dividends. Yet, since the market began to think about an eventual rise in interest rates back in May 2013, this asset class has lost a bit of luster.
The concerns were quite logical: A steady rise in fixed-income yields naturally reduces the appeal of relatively riskier stocks.
But the emerging economic crisis in Europe changes everything. It's increasingly apparent that European economic troubles are here to stay for quite some time, which is likely to keep a lid on global interest rates. It's a bit of a goldilocks scenario for the U.S. economy, as low rates will help our economic recovery to expand without a rate rise headwind.
You would suspect that the pullback in interest rates would help provide support to dividend-paying stocks, but many of them haven't been able to escape the recent market rout. If you've been tracking divided payers but found their dividend yields to be too skimpy, you're in luck. The market slump pushed many 2% yielders into the 3% range, many 3% yielders into the 4% range, etc. In the context of falling fixed income yields, such dividend yields are now comparatively appealing again. Continue reading "Dividend Investors Rejoice: Falling Markets Mean Rising Yields"
