Tags: Peters | dividend | stocks | rates

Morningstar's Peters: Dividend Stocks Worth the Risk of Higher Interest Rates

By    |   Friday, 13 June 2014 09:39 PM

Interest rates will likely rise at some point, but that's no reason to abandon dividend stocks, says Josh Peters, director of equity-income strategy for Morningstar research firm.

"Mentally you have to be willing to accept more interest-rate risk in a high-income strategy than you would have with perhaps a more speculative strategy," he says on Morningstar.com.

"I think it's a good trade-off because, yes, I take more interest-rate risk when I own lots of utilities, lots of food stocks, companies that don't respond a great deal one way or the other to changes in economic activity. But I get a 2-for-1 bargain."

While dividend stocks entail interest-rate risk, they carry less economic growth-risk than more speculative stocks, Peters says.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

"If there's a recession my stocks stand to hold up much better than the S&P 500 index, for example. And I also get the benefit of the income," he notes.

"You don't have that if you go off into other areas of the market where dividend yields are very low or nonexistent."

The S&P 500 Dividend Aristocrats index, which includes S&P 500 companies that have increased dividends for each of the last 25 years, generated a total return of 19.3 during the last year, compared to 22.2 percent for the S&P 500 as a whole.

High-quality dividend stocks aren't overpriced, and that bodes well for the market as a whole, says Mark Hulbert editor of Hulbert Financial Digest.

"There turns out to be plenty of high-quality, dividend-paying blue-chip stocks that are not overvalued," he writes on MarketWatch. "On those past occasions when there were as many of those stocks as there are now, the stock market performed quite well, thank you."

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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Interest rates will likely rise at some point, but that's no reason to abandon dividend stocks, says Josh Peters, director of equity-income strategy for Morningstar research firm.
Peters, dividend, stocks, rates
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2014-39-13
Friday, 13 June 2014 09:39 PM
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