Click to Enlarge Those folks that thought they would be able to hang out in stocks with low volatility or sideways consolidation while interest rates rise are starting to second-guess that plan.
I would be, too — and that’s one reason why I have been so cautious in recent months with high allocations to dividend-paying equities.
The sectors most investors gravitate toward are defensive names in the healthcare, consumer staples and utility arena … most of which rely heavily on the debt markets to finance their ongoing operations. Naturally, as rates rise, margins and/or dividend growth prospects begin to get called into question.
If you have a minimal exposure to stocks at this juncture, now is the time to review your dividend equity buy list. I believe stocks will offer the best buying opportunity in the midst of this correction that we have seen in more than six months. So be ready, and depending on your asset allocation, take advantage of the lower prices.
Two ETFs I favor for clients in our strategic income portfolio are the First Trust Technology Dividend Index (TDIV) and the iShares Minimum Volatility Index (USMV). Both allow you access to a diversified mix of great dividend-paying blue-chip names.
Michael Fabian is Managing Partner and Chief Investment Officer of Fabian Capital Management. As of this writing, he did not hold a position in any of the aforementioned securities. Learn More: Why I love ETFs, And You Should Too.