Dividend Stocks Aren’t a Bubble

Dividend stocks have been on a tear over the past three years, leading some to question whether there’s a bubble in that space. Josh Peters, editor of Morningstar’s “Dividend Investor,” isn’t one of them. “I can't believe people are throwing the B-word around in my sandbox,” he says in an interview on his firm’s website. “I think the word bubble really doesn't work well for dividend-paying stocks, because if you go into the market, you're looking for a high yield.”

But once dividend stock prices go up, the first step toward a bubble, the yield comes down, until it’s not a high-yield stock anymore, Peters points out. And once it’s no longer a high-yield stock, investors seeking income will stay away. “So, people focusing on dividend yield is actually a good pressure-relief mechanism,” he says. “It's telling you that the stock is becoming less and less attractive as it goes along.” But when it comes to a bubble, “I'm not seeing that,” he says.

Source: NewsMax

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