Income investors might not have been as comfortable as usual for much of the last decade. Thanks to the Federal Reserve quintupling its balance sheet since the financial crisis as well as other extraordinary measures taken by the central bank, interest rates remain near historical lows, even seven years after the economic “recovery” began in June of 2009. This is a key reason traditional dividend sectors like Consumer Staples and Utilities are selling at stretched valuation levels based on historical averages. To me, these are two of the most dangerous areas of the current market to be invested in, although both sectors are usually thought of as “low beta” (low volatility) within equities.
Desperate income seekers are paying north of 20 times earnings for entities showing little in the way of earnings or revenue growth, and only to capture a three percent yield. I am avoiding both sectors completely within my own portfolio. When the day of reckoning comes, it will not be pretty for holders of these sectors. I think income investors need to think outside of the box and explore other opportune areas to earn yield within the equity market. Here are the stocks that I invest in for dividends within my own portfolio: General Motors Company (GM), Ford Motor Company (F), Chatham Lodging Trust (CLDT), Hersha Hospitality Trust (HT) and AbbVie Inc (ABBV).
Source: InvestorPlace
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