Dividend Investing and Libya

First, dividend paying stocks from MLPs to utilities have been decoupled from interest rates since early 2008. Instead, they’ve followed prospects for the economy, rising when the news has been good and falling when it’s soured. There’s nothing to suggest they’ve started following interest rates again. Second, rising interest rates proved contractionary in 2003, 2004, 2005, 2006, 2007, and again in 2008, rather than inflationary. Consumers paid more, so they spent less and the faster growing pushing rates higher cooled. That’s likely to remain the case for one reason: There’s absolutely no wage-push inflation in the US, and without a return to ’70s-style inflation is simply impossible.

My approach remains to stick with individual companies that are growing as businesses and therefore lifting dividends over time. I don’t want to pay more than prices that are justified by the growth of these businesses and dividends. This approach requires those who follow it to stick with positions over time, even as the markets move up and down. That means the value of holdings rises and falls throughout the various cycles. But we can steady the value of our overall portfolios by holding a mix of investments that perform well under varying conditions.

Source: Investing Daily

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