How Will Rising Interest Rates Impact Dividend Stocks?

Market manipulation - How Will Rising Interest Rates Impact Dividend Stocks?

As the world awaited the new bailout bill, CNBC reported, “10-year Treasury yield hits highest level in a year”.

“The yield on the benchmark 10-year Treasury note climbed to 1.29% at around 4:15 p.m. ET, breaking above the 1.28% level for the first time since February 2020. Meanwhile, the yield on the 30-year Treasury bond rose to 2.08%.

…. The 10-year benchmark is widely watched as it influences mortgages and other loans.

Treasury yields were higher as investors continued to watch for progress on the proposed $1.9 trillion stimulus package in Congress.”

Bond prices go down when yields go up. How much can they rise before having a major negative effect on the bond market?

A week earlier, I was surprised to see ZeroHedge report, “Never Seen Anything Like This”: Junk Bond Yields Slide Below 4% For First Time Ever In Record Buying Spree:

“The average yield on US junk bonds just dropped below 4% for the first time ever as investors keep piling into an asset class historically known for its “high yields”, although if sub-4% is considered high then there is a problem.”

What are junk bonds?

Investopedia tells us:

“A junk bond is an investment in debt. A company or a government raises a sum of money by issuing IOUs stating the amount it is borrowing, the date it will return your money, and the interest rate it will pay….

Junk bonds have a lower credit rating than investment-grade bonds, and therefore have to offer higher interest rates to attract investors.

The rating indicates the likelihood that the bond issuer will default on the debt.”

We recently wrote about rising inflation. Buying bonds; when the interest rates do not beat inflation, is a guaranteed loser.

A bigger concern

Last year, my wife Jo and I moved a good portion of our investments into dividend-paying stocks, with the help of Tim Plaehn, editor of The Dividend Hunter. Tim’s running a masterclass starting on April 1. You can check it out here.

We recently sold some of our common stock dividend payers with nice profits to reinvest in underpriced preferred stocks.

The CNBC article raised a yellow flag. I checked to see how our dividend payers are doing.

We currently own 12 of Tim’s recommendations. Some we’ve owned for a year or more, and some were bought in February 2021. All 12 are showing gains. In total, our gain is 12.8% (not annualized, but actual). The lowest current yield is 2.9%; however, that stock price appreciation is 21.4%. Some of the preferred stocks are yielding close to 10% based on our purchase price.

1 2 3 4
View single page >> |

For more detailed information on how to get the job done, you can download my FREE report: 10 Easy Steps To The Ultimate Worry-Free Retirement Plan – by clicking  more

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.