Time To Fine-Tune Dividend Holdings

For dividend investors, it's time to get picky. Investors focused on stocks paying regular dividends have lately reaped a bountiful harvest. But investors who snap up dividend payers indiscriminately—or load up on the highest-yielding stocks they can find—may find themselves with some rotten apples. Rising interest rates may hurt some types of dividend-paying stocks far more than others—and some of the most traditional dividend-paying sectors, such as utilities and telecom services, are likely to feel much of the pain, money managers and analysts say.

Although older investors may need to get more selective, they can remain confident in dividend stocks' benefits for retirement portfolios. Look for dividend growth, not current yield. Income-focused fund managers who have a lot of leeway to move money among bonds, stocks, convertibles and other asset classes have lately made some big shifts toward dividend stocks. But those shifts have largely focused on finding future dividend growth, not the highest current yield.

Source: Kiplinger

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