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sagitarius84 (32.62)

Should Dividend Investors Worry About Rising Interest Rates?



February 02, 2018 – Comments (1) | RELATED TICKERS: O , JNJ , KO

If you have followed any news stories over the past year, you might have been exposed to a lot of negative information about dividend paying stocks. I have rebutted some of them, such as the story about the end of the dividend craze. Others include the notion that rising interest rates are somehow so bad for dividend paying stocks, which it would put the end to dividend investingonce and for all. The problem with those statements is that while interest rates affect the relative valuation of assets, they are just one input in valuation formulas. 

I keep hearing that rising interest rates will mark the end of dividend growth investing. I am actually hoping that this talk results in lower entry prices for those investors like me who are in the accumulation age. But for other long term holders who are living off portfolios, I think that they should ignore this noise, and instead focus on enjoying the fruits of their growing income stream.

There are several reasons why I ignore this non-sense:



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1 Comments – Post Your Own

#1) On February 04, 2018 at 12:04 PM, Melaschasm (69.63) wrote:

Interest rates have a variety of impacts on the stock market in general. They can even have a short term impact on the performance of dividend paying stocks.

However, it is the economy that drives the stock market, not the other way around. The Fed could mess up and cause a recession, or successfully pop a stock market bubble. 

Considering the very low rates we currently have, and how slow the Fed has been in raising rates, and it makes it very hard to believe that we are suddenly going to have interest rates high enough to substantially outpace dividends. Divident paying stocks were not terrible investments when mortgages were over 6%, and it is going to take a few years to get to those rates again.

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