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Just over two weeks ago investors could not get enough of high dividend paying utility stocks but now they want nothing to do -- them.
That's behind this flight Paul -- founder of this investment group joins us now some answers.
Lot of people been wondering.
-- if that high dividend paying stock up plays becoming a little -- it's been so popular for so many months with a weak economy.
Well yeah hi -- and I think we'll.
What you have to -- Consider is what are what are the alternatives and when you just take case in point.
The yield on the ten year treasury back we'll you know month ago in the ten year was yielding one point 4%.
Yet more than 60% of the stocks in the S&P 500 yielding more.
Then the ten year.
As interest rates rose -- -- you saw that number decline and it got closer to around 50%.
So you know you as does less and less stocks yielding more than that -- there's you know.
Black you know it they're not act as attractive.
I don't know that tenure yields have been backing up lately but to your point.
-- resistance at the 200 moving day average on the tenure yields and you really expect interest rates to rise that much further and make dividend paying stocks less attractive.
No I mean in the short term I don't think so I think -- come as we don't September and Europe comes back from vacation and people in the US come back from vacation.
We're gonna start seeing more of a lot you know the European problem rising up again.
And as we get into election season and the election nearing.
We're gonna see more uncertainty over the elections which is gonna make the defensive characteristics of these dividend stocks.
Like the utility sector more appealing to investors.
Yeah I think it's too early to tell you kind of agree with me Paul I mean just today we got that CBO forecast if the economy does fall off the so called fiscal cliff it's gonna -- two million jobs lost.
And -- three percentage points off GDP plus the election plus who knows -- -- tax time it's going to be like.
-- -- about did in tax rates out there as well I mean all these things I wouldn't cut and run just yet.
Now I yet there's that you're exactly right -- I mean there is -- there's there is uncertainty out there plus another thing to consider is the demographics is as baby boomers.
They need incumbent -- they're not getting it from fixed income as much anymore so if you look at that at stable dividend paying stocks that offer more attractive yields.
Company -- would be remiss not to rethink their dividend strategies and and pay more pay more out in the form of dividends.
Yeah I mean because this precious you just talked about how should you look for other companies to raise dividends initiate dividends I know we talked about the utilities but.
Give me some of your observations on that -- Well just think -- it -- overall the dividend yield of the S&P 500 is under 2%.
Relative to the ten year treasury that someone attractive relative to history.
The -- -- -- more along the lines of over 4%.
So that's a big difference here and -- at -- still at historically.
Low levels of dividend yields and take into account again the -- -- baby boomers and then plus as we get.
Later towards this year if we do see some clarity on on taxation of dividends.
And of corporate profits earned overseas if we see those move in a more pro.
Less tax way we're gonna see companies you know repatriated.
Funds from offshore and probably paid at least some of that out in the form of higher dividends and interesting discussion Paul -- many thanks to you.
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