Yields remain low and spikes in volatility have caused some concern. Nevertheless, investors may consider a dividend ETF to generate stable returns.
Yields on benchmark 10-year Treasury notes have declined this year, even after the Fed announced its third rate hike in seven months. The yield on 10-year Treasuries have slipped to 2.202% from a high of 2.608% mid-March. The spread between benchmark Treasuries and high-divined payers are widening.
“If rates can stay down here you will see people begin to return to those days of owning high dividend stocks,” Rick Meckler, president of investment firm LibertyView Capital Management, told Reuters.
Investors may turn to dividend payers in a prolonged low rate, low growth environment as they search for yield. Dividend stocks may also be a safer play in a market that could be primed for a pullback, especially in the seasonally weak period of the year.
“September and October are historically trying months for equities and add on to that geopolitical risk, it is somewhat prudent to be taking a little bit off the table here,” Anthony Conroy, president at Abel Noser, told Reuters.
Nevertheless, yield-hungry investors can turn to alternative income-generating investments to make up the difference.