![]() In some cases those instruments, like my high interest bearing checking account, provide returns with almost no risk to capital. Investors that had moved assets to dividend stocks or REITs for their yield have started transitioning away to other instruments that provide better returns. With the rapid increase in interest rates this year, the TINA trade is finally coming to an end. ![]() ![]() Investors could easily get exposure to the Dividend Aristocrats through the SPDR S&P Dividend ETF ( SDY) or the ProShares S&P 500 Dividend Aristocrats ETF ( NOBL) but there is no ETF dedicated to the Dividend Kings that I am aware of. There were only 37 companies that made the cut for inclusion in this rarified group in 2022 including names like Coca-Cola ( KO), Colgate-Palmolive ( CL), Sysco ( SYY) and Hormel Foods ( HRL). ![]() Dividend Aristocrats were companies that had increased their dividends for 25 consecutive years, which was a tall order considering the last 25 year period encompassed the 2001-2003 bear market, the 2008-2009 Great Recession and the COVID-19 pandemic.ĭividend Kings went one step further and consisted of companies that had increased their dividends for 50 consecutive years. Dividend growth stocks were a particularly popular sub-segment, as they provided exposure to companies that not only paid a dividend but increased those dividends year after year and sometimes decade after decade. They felt that there is no alternative (TINA) and stocks could help with both capital appreciation and throw off some income. Investors flocked en masse to stocks and especially dividend paying stocks. If the portfolio were to grow at an after-tax rate of greater than 4%, then the client would not have to tap into principal for expenses and the portfolio could grow to keep up with inflation.Īs time progressed, the rate I was receiving on that checking account came down just as we saw with other interest yielding instruments including CDs, preferred shares and bonds. ![]() The interesting thing with this 4% rate was that it matches the 4% withdrawal rate financial advisors often recommend to clients who have retired. To get that rate, I had to jump through several hoops including setting up direct deposit of funds into that account, completing 10 debit card transactions each month, etc. Several years ago I had a checking account that paid 4% interest on the money I had in that account. ![]()
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