What Lies Ahead For Dividend Stocks?

As an investor, I am not inclined to technical analysis, nor am I, by any means, a chartist. But I am willing to consider that this signal is a harbinger of a looming downturn. Certainly nothing original here. Most observers have been bracing for a correction for months. Given my interest in income investments, I wanted to know how dividend stocks have fared with regard to this marker. Interestingly, the two giants among dividend ETFs, the SPDR S&P Dividend ETF (NYSEARCA:SDY) and the Vanguard Dividend Appreciation ETF (NYSEARCA:VIG), experienced the same event some weeks ago and the gap between the two moving averages has been increasing steadily for both of these.

Most advocates of dividend growth investing rightly emphasize the importance of appropriate entry points. For many of the most highly regarded dividend growth stocks, those entry points have been frustratingly few in the recent past. But the demand for income in the face of historically low fixed income yields has driven valuations of dividend stocks to unsustainable levels. It's not surprising to me that this segment is leading the correction. One hopeful point is that, as the current correction runs its course, we could well see some attractive opportunities for dividend stocks. Among the things I will be watching for is increases in dividend yields as prices decline and, one hopes and expects, dividends increase.

Source: Seeking Alpha

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