Dividends4Life: Bond Selloff Takes Toll on High-Dividend Stocks

The selloff in bonds has abated for now, but it’s already taken its toll on dividend-paying darlings in the stock market. High-dividend pockets of the stock market, including utilities, real estate investment trusts, have been among the hardest hit corners in the wake of the bond market’s recent declines. The selloff in bonds has sent yields sharply higher, luring income-seeking investors back into fixed income and away from dividend-paying shares. High-dividend sectors often trade in tandem with the bond market. These shares have soared in recent years as massive bond purchases by the Federal Reserve sent yields tumbling.

Bill O’Donnell, head Treasury strategist at RBS, says the selloff in bonds is still in the early innings—meaning rate-sensitive stocks could be in for additional pain in the months ahead. Bond markets around the world have soared way beyond sustainable levels, goosed by easy-money policies globally, he said. “I believe we have begun a new long-term bear market in bonds,” he said. “This is a needed break from long-term trends that I think ultimately got everybody into the same trade with no opposing positions to balance it out.”

Source: Wall Street Journal

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