Investing in Dividend Stocks in a Rising Interest Rate Environment

As the Federal Reserve prepares to hike interest rates later this year, maintaining dividend stocks in your 401(k) or IRA remains a sound investment. Dividends are the rewards shareholders receive for owning a stock and represent a portion of the earnings from the company. Most companies pay them each quarter for every share you own, even in mutual funds. Since dividends are issued by many companies, finding the best ones can be tricky in an environment where interest rates are expected to rise.

Investors should look for companies which have a long track record of raising dividends, said Yale Bock, president of YH&C Investments in Las Vegas and a portfolio manager for Covestor, the online investing marketplace. “A key is to look for management teams which have a history of being shareholder friendly,” he said. “Think about ones with 20- to 50-year track records such a Johnson & Johnson (JNJ), 3M (MMM - Get Report) and Exxon (XOM)." Growing companies which still have capital to reinvest in their business after paying the dividend are also good options, Bock said.

Source: The Street

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