The stock market’s harsh reaction to Federal Reserve Chairman Jerome Powell’s speech last Friday should serve as a reminder: Difficult economic times are ahead, and what worked during the bull market can be a dark path for investors who want to keep making money.
We may be in for a years-long cycle of elevated interest rates. That means continuing pressure against stock prices, especially for companies that are heavily indebted or have low profit margins. “ Times of uncertainty favor quality companies with proven business models and attractive cash-flow models that can continue to invest in their businesses through an economic cycle.”
That 74.5% five-year total return for PepsiCo is a bit behind the 79% return for the S&P 500 SPX, -1.10%. But you might want to look at this chart — the ride has been much smoother for PepsiCo: Over the past five years, the Rising Dividends Fund has returned 78%, slightly behind the S&P 500’s 79%. In addition to common stocks, the Equity Income Fund also invests in convertible bonds and equity-linked notes, Quinlan said. He added that he and his colleagues focus on “qualified dividend income,” which means income that is taxed at the most favorable rate. A company might be distributing capital gains or even returning part of investors’ own capital as part of its dividend.