U.S. Rate Rise Sends High-Dividend Stocks Lower

The prospect of rising interest rates in 2014 is sending shares of high-dividend-yielding companies lower as fixed-income assets become more attractive to investors. The Dow Jones U.S. Select Dividend Index has lagged behind the Standard & Poor’s 500 Total Return Index by 4.6 percentage points on a total-return basis since April 30. During the same period, the yield on 10-year U.S. Treasuries has risen to 2.88 percent from 1.67 percent. The dividend group fell to its lowest level in more than a year.

Higher rates on fixed-income securities mean more competition for stocks, particularly those with dividend yields at a premium to the rest of the market, Morgan said. Investors have become more aggressive about pulling money out of the dividend index, according to Jim Stellakis, founder and director of research at Greenwich, Connecticut-based research company Technical Alpha Inc. Amid a general downtrend for this group relative to the S&P 500 total-return index, its performance also has been marked by lower peaks and troughs, which shows “people are becoming more impatient and selling sooner.” If the dividend index falls below a March 2012 trough, this will be the next indicator of further deterioration in investor sentiment, Stellakis said.

Source: Bloomberg

Related Articles:
- 9 High-Yield Energy Stocks Growing Their Dividends
- 6 Stocks With a Sustainable Dividend
- 5 Dividend Stocks Building A Growing Cash Stream
- 9 Dividend Stocks Beating The 4% Rule
- How To Buy Dividend Stocks At The Bottom