Dividend Stocks Are The New Black

A low-growth, low interest-rate world has increased the attractions of steady, formerly frumpy dividend payers, as investors faced with a yield drought look for a bit of income. There are great reasons to favor dividend shares; history, economics, and demographics. Over the very long run, dividends are perhaps the number one driver of equity returns, a relationship that should only be enhanced by a period where low growth makes income that much harder to generate. As well, the aging of the baby boomer cohort means that a huge group is now moving into the years where investors tend to show a preference for income.

All of that should drive demand for steady dividend payers, not just this year but in many to come. That said, there is something in the market's current crush on dividend stocks that makes me distinctly nervous. Three little words - "reaching for yield" - ought to strike fear into the heart of anyone with a knowledge of market history.

Source: Reuters

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