Europe is opening the easy-money spigot — the European Central Bank announced last week that it was putting together plans for a quantitative easing program — and that is fantastic news for high-yielding American dividend-paying stocks and REITs.
That may not make sense at first glance, but hear me out. Capital markets are global, and liquidity sloshes across borders almost instantly. We certainly saw this last year when the Fed’s initial comments about tapering caused a severe correction in U.S. bonds and “bond-like” income investments as well as emerging-market stocks, bonds and currencies.
Most of these asset classes, both in the U.S. and in emerging markets, have enjoyed a rally in the first half of 2014 as investors have come to realize that, even with Fed tapering going ahead at full steam, there remains a remarkable amount of liquidity chasing after a finite supply of income-yielding assets.
As ECB President Mario Draghi takes the stimulus torch from Fed Chairman Janet Yellen, record-low eurozone yields will make U.S. Treasuries look appealing by comparison, which will in turn keep continued pressure on U.S. yields.
Have trouble following all of that? Let me sum it up like this: A new round of eurozone stimulus promises to make U.S. income investments attractive. And today, I’m going to offer four solid American income stocks that should do very well in a low-yielding world.