Dividend income is an important element of total return. But nicely yielding stocks are perceived as being at risk in a rising rate environment. What should the income-dependent investor do in this current climate of rising interest rates?
Argus recommends focusing on dividend growth over dividend yield. Specifically, we would focus on persistent dividend growers -- companies that have boosted their dividend for many years consecutively -- and companies that have an above average rate of dividend growth. We would scour for dividend growth in sectors outside the traditional equity-income areas of utilities, REITs, and MLPs. And for all names, we would track some measure of dividend safety; our favorite is free cash flow coverage of dividends.
Source: Seeking Alpha
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