“Stocks that have a bond-like component will be weighed down by rising interest rates,” Mortimer said in the article.
Jim Stellakis, founder and director of research at Technical Alpha Inc., points out that high-yield stocks have been trading in a “series of declining peaks” relative to the market.
“These lower highs show investors want progressively less and less exposure to high-dividend paying companies,” Stellakis argued.
Mortimer, though, does not suggests exiting out of high-yield stocks completely. Instead, he believes investors should pair high-dividend paying stocks with high-growth stocks, like technology, health care or biotechnology, that don’t have high cash payouts.
For instance, the Technology Select Sector SPDR (NYSEArca: XLK) increased 15.9% since April 30. Meanwhile, the Health Care Select Sector SPDR (NYSEArca: XLV) is up 23.9% and the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB) has gained 48.1%. [Health Care Heaven: Sector’s ETFs Flex Their Muscles]
For more information on dividend stocks, visit our dividend ETFs category.
Max Chen contributed to this article.