Beware the Fed taper? Not quite.
Investors should not race to dump their stocks every time Fed Chairman Ben Bernanke speaks, Brown says.
Investors should not race to dump their stocks every time Fed Chairman Ben Bernanke speaks, Brown says.
The taper talk that began earlier this summer has led to many investors racing away from dividend-paying stocks under the false impression that:
a) less QE means much higher interest rates
and
b) dividend stocks would underperform thanks to competition from bonds which would now be paying higher yields
This line of thinking is precisely backwards - because nominal yield is not the same thing as total return.
Ned Davis (via BlackRock) has run the numbers - it turns out that high-paying dividend stocks outperform non-paying stocks in both neutral rate environments and in rising rates - the opposite of what many people currently believe ...
From BlackRock: