Rising Interest Rates On Dividend Stocks

Dividend stocks have shrugged off every piece of bad news thrown at them – the European debt crisis, China’s slowdown, the sluggish U.S. economy. But their biggest test is yet to come: rising interest rates. With the global economic outlook improving, the rock-bottom yields on government bonds have been creeping higher.

Since Jan. 1, the yield on the 10-year U.S. Treasury has climbed more than a quarter-point to 2.15 per cent, and Canadian yields have also moved off their lows. While the increases have been muted so far, a sustained rise in yields would pose a threat to dividend stocks, some analysts warn. That’s because higher interest rates make bond yields more competitive with stocks and also push up borrowing costs for companies.

Source: Globe and Mail

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