The Globe and Mail reports in its Monday, Nov. 9, edition that Federal Reserve chairman Janet Yellen last week hinted that a rate hike is possible before the end of the year, causing
a slide in the performance of dividend-paying equity sectors. The Globe's David Milstead writes that Merrill Lynch analyst Savita Subramanian says dividend-paying equities underperform
significantly in rising
interest rate environments. Mr. Milstead notes that as a result good dividend payers such as Agrium,
Potash Corp. of Saskatchewan, West Fraser Timber and Teck Resources
may not fare well in such a situation. Other good dividend payers are Magna
International and Linamar.
Ms.
Subramanian's thesis is that the stocks
with the current highest yields
will be hurt most as the Federal
Reserve raises rates. Companies
with lower yields, low debt and
solid balance sheets have the
ability to increase their dividends,
and see their stock prices
rise along with interest rates.
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