Where Dividend Growth And Yield Meet

By Tom Lydon via Iris.xyz

Income investors are often conditioned to believe that high dividend sectors, such as real estate and utilities, are vulnerable when the Federal Reserve raises interest rates. Indeed, since the start of 2017, those sectors have been laggards.

The Federal Reserve has boosted interest rates four times since the start of 2017, including its most recent rate hike in March. Since the start of last year through April 17th, the MSCI US Real Estate Index is down 3.30% while the Utilities Select Sector Index is up 9.50%. The S&P 500 is higher by more than 22 percent over that span.

Jittery dividend investors may be considering a move to dividend growth strategies away from high-yield fare, but there is a trade-off: lack of yield. For example, the Morningstar US Dividend Growth Index, which requires five years of uninterrupted dividend growth1, has a trailing 12-month dividend yield of just 2.17%.

There are, however, avenues for investors to tap dividend growth while having their yield cake and eating it, too.

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