I don’t worry about interest rates going up. I focus my attention on an elite group of blue-chip, dividend-paying stocks. You see… despite what a lot of folks think… dividend-paying stocks outperform the market whether rates are going up or down…
It’s a common worry that dividend-paying stocks will suffer if interest rates rise. But it’s a myth. Independent financial research firm Ned Davis Research Group found that dividend stocks outperformed non-payers from 1927 to 2011 whenever the Fed raised rates.
Dividend-payers returned 2.2% per year, while non-payers returned 1.8% per year. And Ned Davis discovered that dividend-payers beat non-payers when interest rates fell, too. During the study period, dividend-payers returned 10% a year when rates were falling, versus a -2.5% return from non-payers.
The lessons are simple and clear. Famous money managers don’t have all the answers. Calling tops and bottoms and worrying about interest rates is a waste of time when you stick with great dividend-paying stocks… Those investments will keep your money safer while earning you higher returns in periods of both high and low interest rates.
Blogging My Stock Investments 