Dividends4Life: Have dividend stocks become dangerous?

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Have dividend stocks become dangerous?

Posted by D4L | Wednesday, June 03, 2015 | | 0 comments »

"The point in history at which we stand is full of promise and danger. The world will either move forward toward unity and widely shared prosperity — or it will move apart." - Franklin D. Roosevelt. A few weeks ago I was interviewed in Barron's about what I've called the "Bear's Bull Market" and the idea that dividend stocks may no longer be the comparatively safer trade than broader beta.

I do believe that dividend stocks have not changed their behavior relative to history. The more they underperform now due to momentum traders selling out, the more likely they can mitigate downside risks when that downside and correction finally comes. If anything, this is a very good development for tactical traders since this phase will likely allow for more room in the future to outperform. Given that down capture and relative strength in defensive sectors historically has been sharper than cyclical sectors when it matters most, the more they breakdown now, the more powerful those dividend stocks will likely be in a portfolio not as way to make more money, but rather lose less. They then become potentially more dangerous in the bull market for upside potential, and less dangerous for downside protection.

Source: Market Watch

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