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In most cases, rising rates are only bad for the economy when they are rising too fast. However, investors should also look to broaden their search for income beyond bonds. This suggests a greater emphasis on dividend-paying stocks, with an important caveat: Focus on dividend growth rather than the absolute level of yield. Many sectors offering high yields (such as utilities) are expensive and the most vulnerable to a rise in rates. Instead, yield-hungry investors should look for technology, financials, healthcare and select energy companies offering rising dividends. Some investors look for companies that have increased dividends for 25 or 50 years. Most of those are modest increases though. It’s not a big deal to increase your dividend from $0.18 per quarter to $0.19. Others look for big dividend yields. That could also be a red flag. The company may be paying out too much of their cash flow and sacrificing growth. Or the stock has been hit and the dividend could be in jeopardy.
Balance your risk and reward in your investment portfolio by diversifying your assets. This strategy has many complex iterations, but at its root it’s simply about spreading your portfolio across several asset classes. Diversification can help mitigate the risk and volatility in your portfolio, potentially reducing the number and severity of stomach-churning ups and downs. Remember, diversification does not ensure a profit or guarantee against loss. Long-term investors should have a target asset allocation and should stick to that target asset allocation whether rates are rising or falling, and whether the stock market is rising or falling. Oftentimes we are our own worst enemies when we try and time the market. Always look to rebalance and diversify your portfolio to reduce risk and stay focused on your long term goals. Make sure periodic reviews are conducted on your portfolio. Talk with your financial advisor to review and rebalance when necessary. Michael J. Donnellan is President of King Financial, Inc. specializing in stock selection and retirement planning. Feel free to contact him with any questions or
I give greater credence to the most recent past and also for solid increases in the dividends themselves. Search for companies that have increased their dividends each of the last five years and increased them substantially. There are companies that have more than doubled their dividend while growing revenues and earnings.
comments at the M3 Wealth Management office. 7601 W. 130th Street – Suite 1 in North Royalton, Ohio. Phone number (440) 652-6370
Email: donnellan@m3wealthmanagement.com
Securities and advisory services offered through L.M. Kohn & Company Registered Broker/Dealer Member FINRA/SIPC/MSRB 10151 Carver Rd. Suite 100 – Cincinnati, Ohio 45242 Phone: (800) 478-0788
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