With the Federal Reserve widely expected to begin hiking interest rates by midyear, the conventional wisdom is that it’s time to start cycling out of dividend stocks such as utilities. But I would caution investors from exiting such investments before it becomes clearer how strong growth will be in the U.S. and around the world this year.
Investors are concerned that slowing global growth could be a drag on the U.S., a risk that the Fed noted last year. As such, many economists expect the central bank to make only a modest move when it finally raises rates later this year. And if current conditions persist, a small increase in short-term rates may have little effect on market dynamics or equity-income investments. Dividend stocks should continue to be competitive with Treasuries far longer than many had previously expected.
Source: Investing Daily
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