Tags: interest rates | dividend | stocks | Fed

Rising Interest Rates Beginning to Hurt Dividend Stocks

By    |   Wednesday, 05 June 2013 07:56 AM

The recent surge in interest rates has sent many dividend stocks reeling, and the $64,000 question is whether that trend will continue. Views are mixed.

The 10-year Treasury yield jumped to 2.14 percent late Tuesday from 1.66 percent May 2. The yield hit a 13-month high of 2.23 percent last Wednesday.

Meanwhile, dividend payers like utilities, telecommunications and consumer staples stocks have suffered.

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The Utilities Select Sector SPDR exchange-traded fund (ETF), the largest ETF made up of utility shares, sank 9.1 percent in May, its worst monthly performance in more than four years.

The worry is that the Federal Reserve will start tapering its quantitative easing soon. Fed Chairman Ben Bernanke has said that may happen within a few months.

"Anything that has negative exposure to interest rates has been getting hit," Jerry Braakman, chief investment officer of First American Trust, told The Wall Street Journal.

But Hank Smith, chief investment officer of Haverford Trust, doesn't think rates have risen enough to truly trash dividend stocks.

"Rates have to go up in a dramatic and extended fashion before they provide real competition to the higher-yielding dividend-paying stocks," he told The Journal.

Stocks of all stripes gained earlier this week amid speculation the Fed tapering won't come quickly.

“There certainly seems to be an acute fixation on the timing of any adjustment to the asset-purchase program, and I guess I would just encourage everyone to not lose sight of the bigger picture,” Atlanta Fed President Dennis Lockhart told Bloomberg.

“Any adjustment is not a major policy shift. The high level of accommodation will stay in place.”

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The recent surge in interest rates has sent many dividend stocks reeling, and the $64,000 question is whether that trend will continue. Views are mixed.
interest rates,dividend,stocks,Fed
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2013-56-05
Wednesday, 05 June 2013 07:56 AM
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