The market has been anything but typical the past couple of years and it’s all thanks to the Federal Reserve.
The Fed rightfully cut interest rates during the Great Recession and credit crisis in order to spur borrowing/economic activity. The problem is, because things haven’t played out the way the Fed wanted, rates have been stuck in the basement for years now. (That token quarter-percent raise doesn’t really count.)
For income seekers – namely the millions of retiring baby boomers – it’s left them scrambling to find meaningful ways to pay for their retirements. Traditional income products just aren’t cutting it. So, it’s no surprise that dividend stocks have been a hot commodity over the last few years.
However, in the rush to dividend payers, we may have gone too far – especially considering how close we are to another rate hike from the Fed. And yet, maybe we haven’t really stretched valuations on dividend payers at all.
Getting Kind of Lofty…
9.01%. That’s the return – without dividends – for Utilities Select Sector SPDR Fund so far this year. This is a pretty amazing return for such a ‘sleepy and boring’ sector. Usually, a utility’s total return (dividends and capital appreciation) is about that much. So, it goes to show just how much investors are in love with dividend stocks these days.