Sensing end of Fed hikes, some investors return to dividend stocks

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Some investors are giving the shares of dividend-rich companies a second look as expectations grow that the Federal Reserve is nearing the end of a rate-hiking cycle that has lifted bond yields to their highest level in nearly two decades

in a generation have pushed short-term Treasury yields above 5%, their highest level since 2007, widening the options for income-seeking investors after a decade marked by historically low rates. That has helped pressure many of the market’s popular dividend-paying stocks, which investors had turned to when rates were far lower.

A nascent resurgence of interest in dividend-paying stocks can be seen in inflows to the $11.7 billion ProShares S&P 500 Dividend Aristocrats ETF Meanwhile, 44% of global fund managers polled by BoFA Global Research said they now expect high-dividend stocks to outperform those that pay low dividends, a nine percentage-point increase from the previous month.

Nevertheless, investors are seeking out dividend-paying stocks as a source of total return this year in anticipation that bond yields may falter while stocks continue to gain, Silverblatt said.

 

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