Why Investors Are Flocking Back To Dividend Stocks [Johnson & Johnson, Altria Group Inc, Walgreen Company]

For proof, look back to the last time interest rates were low. In late 2003 and early 2004, the federal funds rate hovered around 1%. In June 2004, it finally started to escalate. It took almost a full year for rates to top 3%, and 18 months for rates to top 4% (see chart below).

Effective Federal Funds Rate, Last 20 Years


This time, interest rates are starting much lower – at mere fractions of 1%. Fed officials project that rates will get to 1.4% by the end of 2015 and 2.5% by the end of 2016. Currently, the average yield among S&P 500 stocks is 1.9%. In other words, according to the Fed’s own projections, we’re about two years away from short-term interest rates yielding more than your average dividend stock.

Dividend stocks are still the best place to be if you’re an income investor. When those stocks are performing the way they have in the past month, that’s especially true.

Even with whispers of interest-rate hikes, dividend stocks haven’t lost their appeal on Wall Street. Given that everything the Fed does is at a snail’s pace, that isn’t likely to change anytime soon.

This article is brought to you courtesy of Chris Preston from Wyatt Research.

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