Dividend stocks reap rewards from rate hikes
Despite a potential rise in US interest rates, income oriented equity investors can still access a high level of income and return, according to SPDR ETFs State Street Global Advisors (SSGA) Australia.
Head of SPDR ETFs, Shaun Parkin, found there was a compelling case for global portfolios to hold relatively stable and defensive high dividend stocks.
Taking the SPDR S&P global dividend fund (WDIV) as an example, he said it tracked the S&P global dividend Aristrocrat Index and held about 22 per cent in US stocks, as well as utilites, US REITs, telecoms, consumer discretionary, energy, financials and industrial companies.
"Additionally, as bond yields were low, income-oriented investors were attracted to stable, high yields that companies in such sectors tended to generate," Parkin said.
Compared to bonds, many US high dividend stocks still looked attractive from a pure yield valuation perspective, Parkin said.
US stocks yielded 5.2 per cent on average, and they increased on the back of central bank moves. Meanwhile, South African stocks yielded 5.9 per cent, and they too increased for the same reasons, while they made up 8.7 per cent of the portfolio, Parkin said.
The United Kingdom's stocks in the portfolio yielded 5.4 per cent and they made up 9.9 per cent, while Canadian stocks yielded 4.3 per cent and made up 19.5 per cent of the fund.
Although the market was not anticipating a rate hike in the US in November, it expected a hike in December.
"This would come as a relief to income-oriented investors and US stocks can breathe again, at least until December," Parkin said.
Recommended for you
The Federal Court has issued its verdict in ASIC's first greenwashing case against Vanguard Investments Australia regarding the use of ESG exclusionary screens.
Investment managers who plan to implement artificial intelligence in the next five years expect to see increased productivity, but views are mixed on whether it will boost revenue and assets under management.
A former corporate adviser has been sentenced in the Supreme Court of Western Australia for insider trading to realise a profit of more than $57,000.
Private markets expertise is sought-after for investment operations hires as allocations to alternative assets rise, according to a recruitment firm, but there is a gap between demand and supply.